ECB Executive Board member Isabel Schnabel believes that the European Central Bank will start raising base interest rates shortly after the end of quantitative easing. Both are expected to happen between July and September this year.
“We will raise interest rates at some point in time. At the right time we will react to the actual data,” Isabel Schnabel, a member of the European Central Bank’s executive board, said during a weekend conference in Cernobbio, Italy. She said the right time will probably be in the third quarter of this year, when the ECB will also end its bond purchases, or quantitative easing.
Persistent inflation
The European Central Bank will thus probably finally react to the exceptionally high inflation, which according to the current preliminary estimate reached an annual rate of 7.5 percent in the euro area in March. This is the fastest price increase ever since the creation of the European Monetary Union or the European Central Bank.
Impact of the war
“The speed of normalisation will depend on the economic impact of the war in Ukraine, the strength of the inflation shock and its duration,” Schnable added. She also recalled that the ECB’s mandate includes, among other things, acting on the inflation expectations of eurozone economic agents.
