ECB Hints at Neutral Rates by September

Source: European Central Bank

The European Central Bank is set to put a close to its negative rates, with borrowing costs likely to hit zero by the end of the third quarter, according to President Christine Lagarde. EZU is up 1.48%, while VGK is up 1.56%.

• Lagarde said the current outlook indicates that the ECB could be in a position to exit negative interest rates by the of September.
• The ECB has kept the deposit rate at -0.5% and has maintained this in negative territory since 2014 amid a sovereign debt crisis.
• Lagarde noted that should inflation stabilize at 2% in the medium term, and this could warrant further normalization of interest towards the neutral rate.
• Lagarde also hinted at the possibility that the rates could be hiked above the neutral rate should the eurozone overheat.
• The euro has since appreciated by 1.1% against the dollar to $1.0684 after dropping by over 12% in the past year.