Rate hike by a quarter point realistic, but more possible

Klaas Knot

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. Banks are currently having to pay penalty interest if they hoard excess funds at the central bank. This deposit rate is currently minus 0.5 percent.

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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