DAVOS, Switzerland — It is probably a done deal that the European Central Bank will increase interest rates in July, a Governing Council member told CNBC Monday.
ECB President Christine Lagarde surprised market players on Monday with a blogpost stating that the central bank could increase rates in July and “be in a position to exit negative interest rates by the end of the third quarter.” The ECB’s main rate is currently -0.5%.
“Frankly, if you look at President’s Lagarde’s statement this morning, the deal is probably done because there is a growing consensus,” Villeroy de Galhau, France’s central bank governor and member of the ECB, said at a CNBC-moderated panel at the World Economic Forum.
However, he added, “I think the next steps of the journey are now more important.”
Markets have been contemplating when the ECB will take the first step to raise rates given the high level of of inflation across the 19-member bloc. The challenge for the central bank is to navigate higher prices and low growth — moving too quickly on interest rates could drag economic growth even lower.
“We will bring inflation back towards 2% … it is our commitment,” de Galhau said.
“I will play down the idea of trade off between growth and inflation. [Our] priority is clearly inflation and we will do it,” he added.