2023-05-01 18:36:20
Dhe European Central Bank (ECB) is likely to raise its key interest rates again this Thursday. According to a survey, the majority of economists expect interest rates to rise by 0.25 percentage points. This would increase the deposit rate, which also plays a certain role in savings interest, to 3.25 percent.
Frederic Ducrozet, economist at Bank Pictet, said: “The inflation outlook remains subject to upside risks despite the ongoing tightening of credit conditions, while the economy has shown much more resilience to higher interest rates and financial stress,” he says.
However, an increase of 0.5 percentage points cannot be ruled out if the inflation data for the euro area, which will be published this Tuesday, is significantly higher than expected, said Marco Wagner, ECB specialist at Commerzbank. ECB Executive Board member Isabel Schnabel had indicated that this possibility should not be prematurely ruled out.
Sharp drop in the inflation rate does not continue
The inflation rate in the euro zone was 6.9 percent in March, after 8.5 percent in February. However, it is expected that this decline did not continue in April. The core rate of inflation, which is inflation excluding the sharply fluctuating prices for energy and food, which is currently the focus of monetary policy, actually rose in March, from 5.6 to 5.7 percent. Commerzbank economist Christoph Balz expects it to remain at about the same level in April.
In this context, ECB Vice President Luis de Guindos recently emphasized that core inflation is currently “much more persistent than headline inflation”.
It will be interesting to see whether the ECB will commit itself to one point with regard to its future actions in return for a rather moderate rate hike. Karsten Junius, economist at Bank J. Safra Sarasin, believes it is at least possible that the ECB will link a small interest rate hike with the announcement of a faster balance sheet reduction after June: “This could mean that both the hawks, i.e. the advocates of a tighter monetary policy, and Pigeons, the proponents of a looser policy will be satisfied.”
It is also conceivable that the ECB is already holding out the prospect of further interest rate hikes, depending on the further development of the data. The economists at the American bank Morgan Stanley expect such a “revival of the ECB interest rate forecast”.
Bundesbank President Nagel warns
Jari Stehn, the chief European economist at the investment bank Goldman Sachs, is now anticipating three rate hikes of 0.25 percentage points each in May, June and July.
In a recent interview, ECB chief economist Philip Lane described further interest rate hikes as necessary, but did not specify the exact amount. Bundesbank President Joachim Nagel said that the risks to price stability were pointing upwards: “Therefore, it cannot be taken for granted that we will return to price stability in the medium term.”
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