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ECB Rate Hike Looms: June Decision Expected Amid Inflation Fears
23 Apr
Summary
- ECB deposit rate expected to hold at 2% on April 30.
- Just over half of economists predict a 25-basis point hike in June.
- Inflation forecast to average over 3% for the next three quarters.
The European Central Bank is expected to keep its deposit rate steady at 2% on April 30. This decision comes as economists remain divided on future monetary policy following a potential quarter-point hike in June. Over half of surveyed economists anticipate this June increase, viewing it as an insurance policy against persistent inflation driven by energy price shocks.
Inflation in the euro zone has risen significantly above the ECB's 2% target, largely due to soaring oil prices from the ongoing conflict. Forecasts indicate inflation will average above 3% for the upcoming three quarters and 2.7% for the full year. Policymakers are cautiously navigating these pressures, mindful of past instances where rate decisions exacerbated economic difficulties.
Economists' predictions for rate movements beyond June are varied. While some foresee additional hikes this year, a substantial portion anticipates no further changes, particularly if oil prices stabilize. Economic growth for the euro zone is projected to be around 0.2% quarterly, with a full-year expansion of 0.9%.
