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A European Central Bank rate increase in July is possible but not “likely,” Vice President Luis de Guindos said.

“There’s no reason why” an end to net asset purchases “shouldn’t happen in July,” Guindos told the Spanish newspaper El Correo in an interview published Sunday. Rates will rise after that and may happen within “months, weeks or days. July is possible, but that’s not to say it’s likely,” he said. 

Facing record-high euro-area inflation, some policy makers have been pushing for the first ECB rate hike in more than a decade to come as soon as July. Any decision “will depend on the data and the new macroeconomic projections in June,” Guindos said. 

Without wanting to preempt those forecasts, the ECB vice president said that “a significant weakening of growth” was already noticeable. 

“Even so, in 2022 growth will be positive,” he said. “And if we stick to the technical definition of a recession -- two consecutive quarters of negative growth -- we currently don’t see it.”

Other key statements from the interview:

• “So far, we haven’t seen wage increases that would put” the ECB’s 2% price target over the medium term “at risk, but we have to be very attentive because this is a delayed indicator.”
• “Nominal rates for public debt have increased all over the world, but risk premia are still relatively stable. The risk of fragmentation has not materialized.”
• “With these levels of inflation, interest rates are not going to be as low as they have been in recent years, and governments need to prepare for this. The key, also from the markets’ perspective, is to have credible proposals.”

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