ECB’s Lagarde Hints at Policy Tightening by July

Source: European Central Bank

European Central Bank President Christine Lagarde on Wednesday hinted at the scaling back of its bond-buying purchases in the third quarter and tightening of policy soon after. EZU is up 2.02%, while VGK is up 1.53%.

• Lagarde in a speech at an international conference in Slovenia, said the ECB will end purchases early in the third quarter.
• The first-rate hike is seen to follow “some time” after, but the ECB has yet to make a precise definition of the time frame.
• Lagarde noted, however, that this could come in a few weeks, and normalization will be gradual following the first rate hike.
• A growing number of council members have been calling for a 25 basis-point increase in the deposit rate, which is currently at -0.5%.
• The latest speech comes amid the tensions between Russia and Ukraine, along with global inflationary concerns.
• The conflict is seen to boost the green transition as a means to reduce dependency on “hostile actors.”