Bangalore — The European Central Bank will raise deposit rates in the second half of this year and will not wait until 2023, as previously expected, according to a poll by Reuters economists who have significantly raised inflation forecasts this year.
The change in perspective has risen sharply in many parts of the world after the ECB’s board has shifted to concerns about rising consumer prices, reaching a record 5.1% in the euro area of 19 member states in January of the previous year. Reached.
The majority of ECB watchers on February 7-14 expected the central bank to raise deposit rates from a record low of -0.50% to -0.25% by the end of the year, but financial markets We have already returned to zero and bid. At that time.
Still, the ECB is far behind the Federal Reserve Board, with the federal funds rate expected to rise from 0% to 0.25% in March, perhaps 0.5 points, and some banks have seven federal funds. I expect the fund interest rate to rise. The end of 2022.
Poll respondents are divided into times when the first ECB rate hike will take place, with one economist forecasting a move in the second quarter and 16 out of 51 forecasting a rise in the third quarter. 21 people are forecasting a rise in the fourth quarter.
One-quarter of the respondents, 13 out of 51, have not seen a rise in deposit rates this year, and about 20% expect deposit rates to reach zero at some point in 2022. That is, only 11 out of 51 people.
Simon Wells, chief European economist at HSBC, said: “Given the underlying inflation outlook and the risk of the ECB juggling, tightening is likely to be gradual and moderate, and the size of recent market trends is It still looks overkill to us. ” To the client.
Meanwhile, the ECB is widely expected to end its pandemic emergency purchase program in March. More than two-thirds of respondents, or 31 out of 45, said the parallel asset purchase program launched before the pandemic would be closed by September.
The turmoil associated with the Omicron variant wave of COVID-19 infection slowed eurozone economic growth to 0.3% in the previous quarter. It was hardly expected to rise to 0.4% from this quarter.
Growth was then expected to accelerate to a peak of 1.2% in the second quarter and then slow to 1.0% and 0.7% in the third and fourth quarters, respectively. In a January poll, these numbers were 0.5 percent, 1.1 percent, 0.9 percent, and 0.6 percent.
The economy was projected to grow by an average of 3.9% this year, compared to 4.0% in last month’s poll. After that, it is predicted to record 2.5% next year, a slight increase from the 2.4% predicted in January.
Inflation in the euro area was projected to average 3.8% this year, below the ECB’s 2% target of 1.8% in 2023, but to 3.0% and 1.7% in January.
On a quarterly basis, inflation is projected to average 5.1% and 4.7% this quarter and the next quarter. It was then forecast to be 3.9% and 2.7% in the third and fourth quarters, respectively.
According to a similar analysis, more than 80% of nearly 20 economists have revised these inflation forecasts to at least one-fifth on average.
More than 80% of respondents, or 34 out of 42, say inflation will peak this quarter.
Martin Wader, senior economist at ZKB, the most accurate predictor of the eurozone economy, said: According to Refinitiv Starmine, Reuters is conducting a 2021 poll.
By Shrutee Sarkar