Joachim Nagel, Germany’s central bank governor and member of the ECB, shares his final thoughts on inflation and the possibility of rate hikes in the eurozone.
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The ECB will soon raise interest rates for the first time in more than a decade, a member of the central bank’s board of directors told CNBC on Friday.
The ECB has been in the spotlight for its less aggressive stance on monetary policy compared to other central banks. However, expectations of a rate hike have risen in recent months amid continued rise in inflation, with market players now pointing to at least four rate hikes before the end of the year.
“We are on the right track,” Joachim Nagel, president of the German Bundesbank and one of the more aggressive members of the ECB, told CNBC’s Annette Weisbach.
“At our very important meeting in March, we decided to end our net asset purchases and in the June meeting, depending on the data, we will decide to maybe stop – and I say this because this data here is a very persuasive language – that we will stop our purchases and after that I think we will see the first rate hikes pretty soon,” he said.
His comments indicate that the first rate hike could come in July, once the ECB has debated new economic forecasts released the previous month.
Nagel, who has been employed since January, said he warned of higher inflation since taking on the role and now sees more momentum towards rising interest rates.
“I am very pleased that many colleagues from the Board of Directors are now joining my position here,” he said.
His comments follow those of Francois Villeroy de Galhau, head of the Bank of France and fellow ECB member, who said he expects a gradual hike in interest rates from the summer.
Meanwhile, Italy’s Ignazio Visco, the governor of the Bank of Italy and a notable ECB, told CNBC that a rate hike “may be in the third quarter or the end of the year, but it should be gradual.”
Central banks are under tremendous pressure to drive down inflation as consumer prices continue to climb, fueling a cost of living crisis.
Earlier this month, the US Federal Reserve raised its benchmark rate by 0.5% – the most aggressive hike in 22 years – in the second of what is expected to be a series of hikes this year.
Inflation is currently at a 40-year high in the US, with the consumer price index rising 8.3% year-on-year in April.
The Bank of England, meanwhile, raised interest rates in May for the fourth time since the start of post-covid normalization in December. Still, inflation in the UK has remained stubbornly high, reaching a 40-year high of 9% on Wednesday.
However, the ECB has so far been more resilient to increases, insisting that price pressures should ease in the second half of the year.
Eurozone inflation reached a record high for the sixth straight month in April as the ongoing war in the Ukraine war and the subsequent impact on Europe’s energy supply weighed on the region’s economy.
General inflation in the 19-member region reached 7.5% in April, surpassing the 7.4% reached in March.
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