The European Central Bank (ECB) is heading for the first rate hike in many years. An end to the net purchases of securities is to be expected “very early” in the third quarter, wrote ECB President Christine Lagarde in an article on the central bank’s website.

This would allow for a first interest rate hike in July, the Frenchwoman continued. From today’s perspective, key interest rates could then leave negative territory at the end of the third quarter.

The central bank’s deposit rate, which applies to bank deposits with the central bank, is currently minus 0.5 percent. The main refinancing interest rate, which for a long time was considered the key interest rate but has been overshadowed by the deposit rate in recent years, is on the zero line.

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Lagarde justified the prospect of rising interest rates primarily with high inflation. This recently rose to a record high of 7.4 percent in the euro zone. Further interest rate hikes depend on the inflation outlook: If inflation stabilizes at two percent in the medium term, a gradual further interest rate normalization is appropriate, explained Lagarde. “However, the pace and overall extent of the adjustment cannot be determined in advance.”

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