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MNI BRIEF: ECB Ends APP, Intends July Rate Hike

(MNI) London
(MNI) London

Central bank ends net bond purchases from July 1 and signals intention of 25bps July rate hike.

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The European Central Bank said Thursday it would end net new bond buys under its Asset Purchase Programme on July 1, with a 25 bps rate hike, the first in a decade, intended at the July meeting. Policymakers also noted that a further hike was likely in September, with the size of that hike more dependent on incoming data and could be larger than 25 bps (MNI SOURCES1: ECB Seen Making Two To Three 25-BP Hikes In 2022).

The move was largely in line with expectations, with most policymakers appearing on board with policy normalization. The possibility of the larger 50 bps increase in September was an acknowledgement both of inflationary pressures -- staff projections now see headline inflation at 2.1% in 2024 -- and the concerns of the more hawkish policymakers.

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The European Central Bank said Thursday it would end net new bond buys under its Asset Purchase Programme on July 1, with a 25 bps rate hike, the first in a decade, intended at the July meeting. Policymakers also noted that a further hike was likely in September, with the size of that hike more dependent on incoming data and could be larger than 25 bps (MNI SOURCES1: ECB Seen Making Two To Three 25-BP Hikes In 2022).

The move was largely in line with expectations, with most policymakers appearing on board with policy normalization. The possibility of the larger 50 bps increase in September was an acknowledgement both of inflationary pressures -- staff projections now see headline inflation at 2.1% in 2024 -- and the concerns of the more hawkish policymakers.