European Central Bank President Christine Lagarde rejected the notion that the eurozone was heading for recession, during an interview with Bloomberg on Tuesday from the World Economic Forum in Davos, Switzerland.
“At the moment, we are not experiencing a recession in the eurozone,” Lagarde said. She cited a low unemployment rate, large household savings, and the prospect of a strong summer for the tourism industry, offsetting negative shocks from the war in Ukraine and high inflation.
ECB Preisdent said yesterday that the European Central Bank is likely to start raising interest rates in July and get out of the sub-zero zone by the end of September, according to Bloomberg.
“I expect net in-app purchases to end very early in the third quarter,” Christine Lagarde said in a blog post Monday. “This will allow us to raise the interest rate at our meeting in July, in line with our forward guidance,” she explained.
“Based on current expectations, we are likely to be in a position to exit negative interest rates by the end of the third quarter,” the ECB president added.
Back in April, the ECB kept its broad policy stance on Thursday, as it decided to keep the deposit rate unchanged at -0.5% in line with expectations. It also stuck to plans to slowly undo the extraordinary stimulus as concerns about record high inflation outweigh concerns about a war-related recession.
The bank had reduced the pace of money printing for months but only set a loose timetable for undoing support, focusing on resilience as the conflict in Ukraine and rising energy prices could suddenly change the outlook.
Confirming its previous guidance, ECB said it plans to cut bond purchases, known as quantitative easing, this quarter, and then end them sometime in the third quarter.
It’s worth noting that the ECB lags far behind almost all of its major peers, with many of them starting to raise interest rates last year. In just the past two days, central banks in Canada, South Korea and New Zealand have raised the cost of borrowing.
Meanwhile, the US Federal Reserve is expected to raise interest rates eight or more times over the next two years, tightening policy in the world.
On the other hand, inflation has already reached a record high of 7.5%, with further increases expected. On the other hand, the eurozone economy is now stagnating, at best, with the impact of the war hitting families and businesses in its 19 nations.
