By Zolnierek @

The European Central Bank is preparing a series of rate increases set to begin with a quarter-point bump in July. Martin Arnold reports for the Financial Times:

The European Central Bank has paved the way for a series of rate rises, starting with a quarter-percentage point move in July and raising the prospect of a bigger half-point shift in September.

The ECB said in a statement on Thursday that its governing council “intends to raise the key ECB interest rates by 25 basis points at its July monetary policy meeting”.

It added that, if the inflation outlook persists or deteriorates, “a larger increment will be appropriate at the September meeting”.

The bank last raised rates in 2011 and its deposit rate now stands at minus 0.5 per cent.

Markets viewed the possibility of a bigger increase in September as a hawkish surprise, and eurozone government bonds weakened following the announcement. Germany’s 10-year bond yield climbed 0.08 percentage points to 1.44 per cent. Riskier debt sold off more sharply, with Italy’s 10-year yield up 0.16 percentage points to 3.62 per cent. The euro edged higher to $1.076 against the dollar.

Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, said: “They have reversed the burden of proof. Inflation needs to improve for them not to hike by 50 basis points in September.”

ECB president Christine Lagarde and chief economist Philip Lane had signalled rate rises of a quarter of a percentage point as the benchmark for its meetings in July and September ahead of Thursday’s vote.

Beyond September, the ECB said it “anticipates that a gradual but sustained path of further increases in interest rates will be appropriate”.

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