European Central Bank Governing Council member Ignazio Visco has added his voice to heated discussions on when the ECB will begin to raise its benchmark interest rate.
Rates in the Eurozone have been negative following the region\u2019s sovereign debt crisis, and the ECB has confirmed that it will conclude its net asset purchases in the third quarter \u2014 opening up the possibility of a rate hike.
Some market participants are anticipating a July rate hike, with reports than more hawkish members of the ECB are keen to raise rates sooner rather than later.
Visco, the governor of the Bank of Italy and a notable \u201cdove\u201d \u2014 who tend to favor more supportive monetary policy \u2014 told CNBC Thursday that it\u2019s \u201cvery likely\u201d asset purchases will end in June, leading to the issue of what to do with rates.
\u201cWe said that they will be adjusted sometime after the end of the purchasing program; now this sometime has to be defined, we have to look at the developments, it may be during the third quarter or at the end of the year, but it has to be gradual,\u201d he said.
\u201cAs we said there are three main conditions that we are looking for: the first is gradualism, the second is optionality and the third, we have to guarantee smooth functioning of financial markets that this flexibility is necessary.\u201d
The Governing Council is facing a dilemma with inflation hitting a record high of 7.5% in March and the economic growth outlook weakening due to the war in Ukraine.
The interest rate on the ECB\u2019s main refinancing operations and the interest rates on the marginal lending facility and the deposit facility remains unchanged at 0.00%, 0.25% and -0.50% respectively. The U.S. Federal Reserve and the Bank of England, meanwhile, have both already embarked on their rate-hiking cycles.
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