A top European Central Bank official said that as a first move towards tighter policy the monetary authority could raise its deposit rate, followed by an increase in its main policy rate.
Somewhat atypically perhaps, Reuters cited a European Central Bank spokesman as saying that “Governor [Ewald] Nowotny's views are his own. They do not represent the view of the Governing Council.”
In an interview earlier on Tuesday, Nowotny, a member of the GC, had told Reuters he would have “no problem” if the deposit rate was lifted from its present level of -0.4% to -0.2% as a first step.
As its name implies, the deposit rate fixes how much lenders earn on the funds deposited with the ECB and for some policymakers serves as an anchor for the entire euro area government bond interest rate curve.
Hence the potential sensitivity of the issue.
It was lowered into negative territory in order to keep lenders from hoarding cash and, especially in certain jurisdictions, some analysts were eager to see it rise, believing that it unncessarily crimped banks' profitability.
Nowotny also reportedly argued that the ECB's bond purchase programme should be completely wrapped-up by the end of 2018.
As of 1911 BST, euro/dollar was trading 0.24% higher to 1.23508, having hit an intraday high at 1.2378.