ECB’s Christine Lagarde signals July and September rate hikes

FRANKFURT – The European Central Bank is set to raise interest rates in July and September, President Christine Lagarde said in a blog post published Monday.

This is Lagarde’s first explicit call for two interest rate hikes in quick succession, although several her colleagues on the ECB’s Governing Council have previously suggested as much.

“I expect net purchases under the [bond buy program] to end very early in the third quarter,” Lagarde wrote, confirming the end of the ECB’s quantitative easing program. “This would allow us a rate lift-off at our meeting in July, in line with our forward guidance. Based on the current outlook, we are likely to be in a position to exit negative interest rates by the end of the third quarter.”

To lift interest rates, currently at minus 0.5 percent, into positive territory by the end of the third quarter requires two 25 basis point hikes between now and then.

Lagarde’s comments come after finance ministers and central bankers of the G7 economic powerhouses on Friday concluded their meeting with a pledge to fight mounting inflation pressures.

“The next stage of normalization would need to be guided by the evolution of the medium-term inflation outlook,” Lagarde wrote. “If we see inflation stabilizing at 2 percent over the medium term, a progressive further normalization of interest rates towards the neutral rate will be appropriate. But the pace and overall scale of the adjustment cannot be determined ex ante.”