Lagarde expects the ECB’s first rate hike in a decade to come in July

“I expect net purchases under the APP (program) to end very early in the third quarter. raise rate In our July meeting, it is in line with our future orientation,” said the French woman, drawing attention to an article published on the ECB blog.

Likewise, the head of the institution points out that, from the current point of view, the entity is probably in a position to “do”. Getting rid of negative interest rates at the end of the third trimester.

According to him, the significant upward change in the inflation outlook is nominal variables and this includes interest rates.

“This does not mean tightening monetary policy; rather, leaving policy rates unchanged in this environment will create policy easing. not right now‘ he argues.

In any case, Lagarde stresses that the next phase of normalization of the ECB’s monetary policy should be driven by the evolution of monetary policy. hopes medium term inflation

“If we see inflation stabilize at 2% over the medium term, we’ll see interest rates go up. neutral rate”warns that the overall speed and adjustment scale cannot be predetermined.

Therefore, if the eurozone economy is overheating as a result demand shock On the positive side, it would make sense for Lagarde to raise the official rates above the neutral rate in turn.

However, he warned that the situation is currently complicated by the presence of negative supply shocks. uncertainty on how quickly existing price pressures will ease, the development of excess capacity, and the extent to which inflation expectations will remain in line with our target.

“In such a scenario, there are arguments in favor of it. gradualism, optional and flexibility when it comes to adjusting monetary policy,” he says.

In this context, Lagarde would argue that if necessary, the ECB’s design and deploy new instruments to ensure the transmission of monetary policy as it moves towards normalization.