The European Central Bank (ECB) could raise interest rates at the end of next year. Ending bond purchases would be a strong signal that the move will come in the next two quarters, Governing Council member Robert Holzmann said Wednesday.
Context // Last week, the ECB took a further step in reducing crisis-era stimulus, stating that it would end emergency bond purchases in March but temporarily double the pace of its Bond Purchase Program. Longer-lasting assets (APP) to ease the transition.
- “We can reduce or suspend the purchases of the APP that are still pending, and if that happens it would be a signal for the markets, because we have established that only after the suspension or cessation of purchases will interest rates be increased,” said Holzmann , governor of Austria’s central bank, at a press conference.
- The market interpreted Holzmann’s statements as a probe balloon by the ECB to measure not only the response of investors, but also the reaction of the economies of the south of the euro. The rate hike would harm highly indebted bloc countries such as Spain.