Bank of Spain advocates for a gradual increase in rates to around 1%

Bank of Spain Governor Pablo Hernández de Cos advocates a hike in interest rates European Central Bank (ECB) “soon” after July, after which other growth will “gradually” be around 1%, said the entity’s annual report.

Hernandez de Cos remembers that last March was loan purchase A decision will be taken to end the ECB program against the pandemic and, predictably, the general asset purchase program in the third quarter of this year in June.

In the opinion of the Governor, this completion should be at the beginning of the quarter, to proceed, “soon after”, before increase in interest rates in the euro area; In the following quarters, “continuous additional increases” may be made until a “level in line with the natural interest rate” is reached.

The natural interest rate level is defined as the level that keeps inflation stable at its target and, as he himself explains, “available estimates, subject to high uncertainty, keep it at low prices in the euro area.” or slightly above 1%’.

Finally, the governor advocates a progressive increase in interest rates from the current -0.5% to about 1%, although he insists that in “particularly uncertain” situations such as the present, the hike process should be gradual. “It’s about avoiding sudden movements,” he says.