The European Central Bank (ECB) on Thursday unveiled a roadmap to wind down stimulus policies and raise interest rates after a governing council meeting.

If the incoming data support the expectation that the medium-term inflation outlook will not weaken even after the end of the net asset purchases, the ECB will conclude net purchases under its asset purchase program (APP) in the third quarter, ECB President Christine Lagarde said at a press conference after the governing council meeting.

The end of the net purchases has been set as a prerequisite for interest rate rise by the ECB. Lagarde explained that any adjustments to the key ECB interest rates will take place some time after the end of the net purchases and will be gradual.

In principle, the remarks by Lagarde opened the door to interest rate increases in 2022, a sharp contrast to an allegation made by Lagarde in November 2021 that the ECB was highly unlikely to raise interest rates in 2022.

The ECB also confirmed that the pandemic emergency purchase program will come to an end at the end of March as planned.

The ECB revised its inflation forecast with annual inflation at 5.1 percent in 2022, 2.1 percent in 2023 and 1.9 percent in 2024. Blaming the conflict in Ukraine, Lagarde said the ECB revised down the economic growth projection for the euro area. It expects the growth in the euro area to be 3.7 percent in 2022, 2.8 percent in 2023 and 1.6 percent in 2024.

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