A top European Central Bank official has raised the prospect of a half percentage point interest rate increase in July if inflation continues to climb, the first time such an aggressive shift has been mooted.
Tuesday’s comments by Dutch central bank chief Klaas Knot, one of the more hawkish members of the ECB’s rate-setting body, sent ripples through financial markets, as the euro rose 1.1 per cent against the US dollar to $1.0546 and eurozone government bond prices fell.
ECB president Christine Lagarde has signalled that the bank’s first rate rise for more than a decade is likely to occur at July’s governing council meeting. But she and many other policymakers have stressed they will move only “gradually” — indicating any change to rates will be in quarter-point increments.