The European Central Bank (ECB) will begin tapering its generous asset-buying program in the fall, according to the CEO of Italy's largest retail bank, with interest rate hikes to follow as soon as 2018.
"In one year (or) a couple of years, we will have, for sure, a reduction in quantitative easing and we will have an increase in interest rates," Carlo Messina, chief executive officer at Intesa Sanpaolo, told CNBC on Wednesday.
The ECB held the euro zone's benchmark interest rate at zero percent and left monetary policy unchanged at its April meeting. President Mario Draghi also confirmed the central bank planned to maintain its monthly pace of quantitative easing (QE) until at least the end of the year.
Many observers correctly predicted the ECB would not amend monetary policy shortly before the run-off vote in the French election, while Messina suggested it would be Germany's vote for a new premier in September which could become the threshold for Europe's central bank to amend its approach.
"The position of maintaining (QE) will come to an end, in my view, after the German election… But starting from 2018, it is likely that interest rates can increase and there could be some reduction in the amount of government bonds that can be bought by the ECB," he added.
European banks have been struggling with ultra-low interest rates as they attempt to restore their balance sheets in the aftermath of the global financial crisis.