ECB Governing Council member Madis Müller said the central bank could already outline its interest rate expectations for the coming months at the June meeting. He added that the first step is to end asset purchases in early July, but “we could even discuss if we should end purchases a few weeks earlier.”

“The real issue is interest rate increases and we shouldn’t have much of a delay there either,” Müller added. “The recent data confirm that the monetary policy stance is not appropriate given where inflation is and given inflation expectations.”

“Even if we go by 25 basis point increments, we may get to a positive rate by the end of the year. For the time being, 25 basis points would be an appropriate increment.”

Separately, another Governing Council member Francois Villeroy de Galhau told France Inter radio today, “I think that from this summer onwards, the ECB will gradually raise its interest rates.” The Ukraine war provided a “negative shock” for the French economy. He added, “inflation is the principal concern of companies and citizens.”

ECB Governing Council member Villeroy de Galhau said today that “We remain committed to maintaining interest rates very low, which is good for the economy:” And, “Progressively we are withdrawing monetary stimulus… but it is very progressive and depends on improvement in the economy. We’ll take the time it takes.”

Villeroy also noted that uncertainties are the main reason for the slow down in the economy. That also echoed ECB President Mario Draghi’s comment. The economic projections to be released during March ECB meeting will be watched closely. And, Villeroy hinted that there may be downgrade in GDP forecasts.

In the post meeting press conference, ECB President Christine Large warned that the spread of coronavirus has been as “major shock” to global and Eurozone growth prospects. And, “even if ultimately temporary in nature, it will have a significant impact on economic activity”. There will be slowdown in production as a result of supply chains disruption, reduced domestic and foreign demands. In addition, the heightened uncertainty negatively affects expenditure plans and their financing.”

She urged government and all other policy institutions to “take timely and targeted actions to address the public health challenge of containing the spread of the coronavirus and mitigate its economic impact”. In particular, “an ambitious and coordinated fiscal policy response is required to support businesses and workers at risk.”

In the march ECB staff macroeconomic projections, GDP growth for 2020 was downgraded from 1.1% to 0.8%, with “very muted growth in H1. 2021 growth was revised down from 1.4% to 1.3%. 2020 HICP inflation is projected at 1.1%, and 1.4% in 2021, unchanged. But recent sharp decline in oil prices poses significant downside risks to short-term inflation outlook.

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