AndChristine Lagarde, boss of ZB, is preparing financial markets for the scenario of a turnaround in interest rates in July. Bond purchases are likely to be phased out early in the third quarter, followed by a rate hike that could come “a few weeks later,” the Frenchwoman said at a conference in Slovenia on Wednesday. More recently, a number of ECB representatives had announced an initial interest rate hike for July. On Wednesday, ECB President Frank Elderson raised the possibility that interest rates might rise in July.
Lagarde’s statements are compatible with the July appointment. “We haven’t yet defined exactly what ‘some time later’ means,” said Lagarde. “But I made it very clear that it could be a period of a few weeks.” On 9 June the Governing Council of the ECB will discuss future monetary policy, with the next meeting to be held on 21 July. Thereafter, the Governing Council of the ECB will no longer meet for a regular monetary policy meeting until September. The Frenchwoman indicated inflation, which is expected to remain high for some time.
The pressure on the ECB to raise key interest rates has recently increased due to the high rate of inflation in the euro area. It hit a record 7.5% in April. In Germany, inflation was 7.4 percent in April, the Federal Statistical Office confirmed Wednesday. In other countries like the United States or Great Britain, central banks have already raised interest rates this year.
The first banks are abolishing negative interest rates
In view of the record inflation in the euro area, the head of the Bundesbank, Joachim Nagel, is also calling for an intervention. It is important to act quickly to avoid second-round effects such as price and wage escalation and inflation expectations that get out of control. At the FAZ Congress last week, Nagel said that the ECB should not remain inactive and that it will soon have to follow the US Federal Reserve on the path of normalizing monetary policy: “We must do something,” was his call.
The deposit rate in the euro area is currently minus 0.5%. This means that banks have to pay default interest if they park excess funds with the central bank. The key interest rate is currently 0.0%. Some banks are taking the fact that there are growing signs of a turnaround in interest rates as an opportunity to say goodbye to negative interest rates for their customers. On Tuesday, ING Germany bank announced that it will increase allowances for credit balances on current accounts and call money, for which no custody fee is due, from the current € 50,000 to € 500,000 on 1 July account. In addition, it should be possible for new customers to open a new so-called extra account, which is a form of overnight money account, so that even larger amounts can be parked in the bank without custody fees. The ING is therefore passing on to its clients the positive trend in capital market interest rates at an early stage, the bank said.
In many banks – estimated to be around one third in the industry – negative interest rates, custodian fees and deposit fees are directly linked to the ECB’s deposit rate. So they would automatically disappear anyway with the end of negative ECB interest rates. For marketing reasons, it could therefore be interesting for banks to announce the end of custody fees in advance, says Stuttgart banking professor Hans-Peter Burghof. However, it also appears that given capital market interest rates in Germany, which were already rising before the ECB’s key interest rates were set, it is becoming more attractive for banks to refinance themselves through customer deposits. , which produce little interest, rather than through the capital market.