Several monetary watchdogs have already envisaged a turnaround in interest rates for July.
(Photo: Reuters)
Amsterdam The possibility of faster rate hikes by the European Central Bank (ECB) prompts investors to buy euros. The common currency rose in price by almost a percent to 1.0527 dollars. ECB Council member Klaas Knot had previously commented on the turnaround in interest rates.
He expects interest rates to rise by a quarter of a percentage point in July. This assumption seems realistic to him, the Dutchman explained in a television appearance. However, should data suggest that inflation is more broadly based or picking up over the next few months, a larger rate hike cannot be ruled out.
“In that case, a logical next step would be half a percentage point,” he added. Knot is the first ECB official to suggest a rate hike of this magnitude. In the past, the ECB had emphasized that it intends to proceed step by step in normalizing its monetary policy.
In the USA, the Federal Reserve also raised interest rates by 0.5 percentage points at the beginning of May. The key interest rate there is now in a corridor of 0.75 to 1 percent.
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In the euro area, the deposit interest rate, which is decisive for monetary policy, is currently minus 0.5 percent. This means that banks have to pay negative interest on excess funds that they hold at the central bank.
Several monetary watchdogs have already envisaged a turnaround in interest rates for July. Ninety percent of economists polled by Reuters expect the deposit rate to be zero or higher by the end of the year.
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