May 20, 2022
Madis Müller, governor of Estonia's central bank

The European Central Bank is likely to raise interest rates from record lows in July, and may outline its rate expectations for the coming months at its June 9th meeting, according to ECB policymaker Madis Müller.

With Eurozone inflation already hitting a record high of 7.5%, almost four times higher than the ECB’s target, pressure is growing to end stimulus measures which critics say are driving price rises. Bond purchases are set to end in early July, but some are pressing the need to move more decisively, ceasing bond purchase immediately, ending asset buys and introducing rate hikes.

Müller, who is governor of Estonia’s central bank, said that such moves would be possible.

“We could even discuss if we should end purchases a few weeks earlier,” said Müller. “The real issue is interest rate increases and we shouldn’t have much of a delay there either.”

“The recent data confirm that the monetary policy stance is not appropriate given where inflation is and given inflation expectations,” he added.

A rate hike in June would break the bank’s promise to halt bond purchases first, but the ECB may decide to announce imminent rate rises at its June meeting, possibly as soon as July. send a strong signal on June 9 about the imminence of a rate rise, which would be the first in over a decade.

The US Federal Reserve hiked rates by 50 basis points last week and is expected to make similar moves at its next two meetings. The ECB has the luxury of being able to implement changes more gradually but will need to raise interest rates from their current negative territory.