by Jonathan Cable
LONDON (Reuters) – The European Central Bank (ECB) will raise its main interest rate at least twice more to take it to 3.25% in the second quarter, said a majority of economists polled by Reuters who see a upside risk on the cost of credit.
ECB President Christine Lagarde hinted at the beginning of the month that the Frankfurt institution would raise the cost of money by an additional 50 basis points in March after a rise of the same magnitude on February 2.
As a result, all 57 economists polled by Reuters between Feb. 10-15 forecast a deposit rate of 3.00% at the end of the ECB’s monetary policy meeting on March 16.
The ECB could then opt for a 25 basis point hike in the second quarter, according to the median of their forecast, thus bringing the final deposit rate to 3.25% and the refinancing rate to 3.75%.
The markets are also anticipating an imminent end to the rate hike by the US Federal Reserve (Fed) and the Bank of England (BoE).
Regarding the ECB, 26 out of 56 economists expect a rate hike of 25 basis points in the next quarter, 19 an increase of 50 basis points, nine no hike and two others an acceleration in the pace of tightening with a hike of 75 basis points. base.
Responding to a further question, an overwhelming majority – 26 out of 28 – said the ECB was more likely to raise rates beyond the expected peak rather than the other way around.
“Given the persistence of elevated underlying inflationary pressures, the risk to our ECB outlook is on the upside,” analysts at DWS Group said.
For Melanie Debono of Pantheon Macroeconomics, “March is more or less a done deal” when it comes to the magnitude of the ECB’s rate hike. She expects more differences on the decisions that will be made in May.
Pierre Wunsch, Governor of the National Bank of Belgium and member of the Governing Council of the ECB, estimated at the beginning of the month that the rate hikes could exceed market expectations, which currently expect a final deposit rate at 3.50%.
None of the 22 economists surveyed predicts an ECB rate cut this year.
Concerning inflation, which slowed down over one year to 8.5% last month in the euro zone against 9.2% in December, the survey forecasts a continuation of the fall in prices but inflation should not fall back to 2%, the target set by the ECB, before at least 2025.
For economic forecasts, the survey anticipates GDP growth in the euro zone of 0.1% in the second quarter after an expected contraction of 0.2% this quarter, which would make it possible to avoid a recession in the technical sense of the term.
In the third and fourth quarters, growth is seen at 0.2% and 0.3% respectively.
Gross domestic product is expected to rise 0.4% this year before accelerating growth to 1.2% in 2024.
(Reporting Jonathan Cable; Susobhan Sarkar and Sarupya Ganguly investigations; Claude Chendjou, editing by Kate Entringer)
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