European Central Bank (ECB) Governing Council member Olli Rehn said that they may start raising interest rates in July to ensure that inflation expectations remain anchored while speaking in an interview in Austria.
Key quotes
“We are seeing signs of second-round effects.”
“It’s important that we send a signal that these higher inflation expectations we are currently witnessing will not become entrenched.”
“it’s “reasonable that we will rather sooner, in my view in July, start raising rates in line with our normalization of monetary policy. And would expect that when autumn comes, we would be at zero.”
What “we would have in our toolbox in reserve” is “a kind of instrument that would help to counter possible unwarranted fragmentation of financial conditions in Europe.”
“We are seeing some stagflation tendencies.”
Market reaction
Despite the hawkish comments from the ECB policymaker, EUR/USD remains under heavy selling pressure on a firmer US dollar and risk-aversion.
The pair is trading at 1.0515, down 0.32% on the day, as of writing.