As the anticipated July interest rate hike looms, Central Bank of Ireland governor Gabriel Makhlouf said at a recent Ibec national council meeting that the current deposit rate of minus 0.5% should be “in positive territory by early next year”.
He added that “the first move in the European Central Bank’s interest rates will happen soon after net asset purchases end”. Bond-buying under the ECB’s asset purchase programme was introduced in late 2014. It is expected to end “either next month or in July”.
Bond-buying under the organisation’s Covid-related EUR 1.85 trillion stimulus programme concluded in March 2022.
ECB president Christine Lagarde also said that a rate increase could come “a few weeks” after net asset purchases concluded. The bank should finalise the interest rate hike at its scheduled governing council meeting on July 21.
According to the Central Statistics Office, inflation in Ireland was running at 7% in April. Price growth is driven by higher energy, fuel, and grocery prices, and is the fastest experienced in the country in decades.
“I am acutely aware of the impacts of inflation on people’s lives and businesses. It affects the whole community and some more than others,” said Makhlouf. “We know that those who are disproportionately affected are lower-income households, older people, and rural households. We have reached the point where we on ECB’s governing council need to act.”