May 29, 2018 / 3:51 PM / 3 months ago

ECB may decide stimulus end in June, up rates a year later: Lautenschlaeger

FRANKFURT (Reuters) - The European Central Bank could decide next month to end its stimulus program this year and hike interest rates towards the middle of 2019, ECB board member Sabine Lautenschlaeger said on Tuesday.

FILE PHOTO: Sabine Lautenschlaeger, executive board member of the European Central bank (ECB), looks on during the Bundesbank Banking Congress "Symposium on Financial Stability and the Role of Central Banks" in Frankfurt, February 28, 2014. REUTERS/Ralph Orlowski )

Investors have dropped long-standing bets that the ECB would hike rates in June 2019 amid signs of weaker economic growth in the euro zone and market turmoil associated with a political crisis in Italy.

But Lautenschlaeger, an outspoken policy hawk, brushed off the soft patch and said the fate of the ECB’s 2.55 trillion euro money-printing program could be sealed at a meeting in Riga on June 14, earlier than indicated by most other policymakers.

“June might be the month to decide once and for all to gradually end net asset purchases by the end of this year,” Lautenschlaeger told a university lecture. “A first hike around the middle of 2019 is not entirely out of the ballpark.”

As recently as early May, investors were fully pricing in a rate rise at the ECB’s June 2019 meeting but they have now pushed back expectations to October of next year.

This follows a string of weaker-than-expected economic data and a political crisis in Italy over the country’s future in the euro zone, which has roiled financial markets in the bloc’s third largest economy and started to affect other debt-laden countries.

Lautenschlaeger did not mention Italy but she struck a confident tone on the economy.

“We are seeing that the pace of growth has become more moderate, but we are not seeing a turning point,” she said. “We remain confident in the strength of the economy.”

Reporting by Francesco Canepa and Balazs Koranyi; Editing by Edmund Blair

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