European Central Bank President Christine Lagarde is gaining key allies for her plan to raise interest rates out of negative territory this summer, although one of her team members expressed some skepticism regarding the future ECB policy on Wednesday.
Lagarde announced this week that the ECB’s key deposit rate of minus 0.5 percent should start to rise in July due to increasing inflation and could be at zero or 'slightly above' zero by the end of September, before further increasing 'towards the neutral rate'.
The head of the Dutch central bank Klaas Knot, who is among the most conservative members of the ECB’s Governing Council, stated that he fully supports such a plan.
– I am fully on board, I fully support everything that is on (Lagarde’s) blog – Knot said at a panel at the World Economic Forum in Davos.
The head of the Finnish central bank Olli Rehn also expressed support for raising interest rates during the summer, as did ECB Chief Economist Philip Lane.
ECB President Christine Lagarde indicated earlier this week on her blog that borrowing could soon become more expensive.
– Based on current outlooks, we are likely to be in a position to exit negative interest rates by the end of the third quarter – Lagarde wrote, giving the clearest indication that the ECB is heading towards its first interest rate hike in several years.
Currently, the central bank’s key deposit rate stands at minus 0.5 percent. The main refinancing rate is at zero.
Further increases in the rate will depend on inflation outlooks, Lagarde said, warning that 'the pace and overall extent of adjustment cannot be determined in advance'.
