Business Maverick: ECB Calls Time on Era of Ultra-Low Rates With Big Hike Possible

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The European Central Bank brought down the curtain on years of ultra-loose monetary policy, committing to a quarter-point increase in interest rates next month and signaling a bigger hike in the fall.

Announcing a first rise in borrowing costs in more than a decade to confront record inflation, the ECB on Thursday outlined a slightly more aggressive path than economists. With fresh forecasts showing a faster course for euro-zone prices than earlier thought, it also said it will cease net asset purchases on July 1.

“It is good practice and it is actually often done by most central banks around the world to start with an incremental increase that is sizable, not excessive, and that indicates a path,” Lagarde told a news conference. “This generally reads as the ECB finally realizing they need to be in ‘catch-up’ mode with rate hikes, at least out the gate,” economists led by James Rossiter at TD Securities said in a report. “Once rates have reached positive territory, the pace of tightening can slow.”

 

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