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GDP poll data
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ECB deposit rate long term outlook
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ECB refi rate long term outlook
By Jonathan Cable
LONDON, March 10 (Reuters) - The peak for European
Central Bank interest rates will be much higher than thought
only a month ago, according to economists polled by Reuters, and
they added that stubbornly high inflation would push
policymakers to be more aggressive.
Having flagged a 50 basis-point lift next week at the
previous Governing Council meeting, ECB President Christine
Lagarde doubled down on Sunday and said the increase was "very
very likely".
All 60 economists polled by Reuters March 7-9 believed her
and said the bank's deposit rate would rise 50 basis points to
3.00% on Thursday.
Medians in the poll showed the euro zone's central bank
adding 25 basis points at the following three meetings in May,
June and July to give a terminal deposit rate of 3.75%, higher
than the 3.25% peak expected in a February poll.
"A 50 basis-point rate hike next week looks like a done
deal. The more heated debate at the ECB will be about the path
for monetary policy beyond the March meeting," said Carsten
Brzeski at ING.
Markets are pricing in a peak of 4.00%.
U.S. Federal Reserve Chair Jerome Powell said on Tuesday the
central bank watching over the world's largest economy would
likely need to raise interest rates more than expected in
response to recent strong data and was prepared to move in
larger steps.
But like ECB policymakers who have been arguing over just
how high rates in the 20 countries using the euro need to go,
economists were also divided.
While the median showed the deposit rate peaking at 3.75% it
was a view held by only 19 of 60 economists surveyed. Twelve
said it would be higher but 29 said it would be lower. The
highest forecast was for 4.25%.
However, over 90% of respondents to an extra question, or 35
of 38, said the risks were the terminal rate would be higher
than they expect.
Euro zone inflation - running at a higher-than-expected 8.5%
in February and over four times the bank's 2% goal - was
predicted to drift down but remain above target until 2025 at
least.
It will average 5.8% this year and 2.5% next, the poll
showed.
"The real economy was stronger than expected at the start of
the year, which implies less slack than expected, while core
inflation was much higher," said Luca Mezzomo at Intesa
Sanpaolo.
Some economic readings have been better than feared,
particularly through the winter, but the recovery is tentative
and several indicators on Monday added to signs that even if a
recession may have been avoided, no upturn is in sight.
There is now only a 34% chance of a recession within the
coming year, the poll found, down from 50% in a January poll.
However, euro zone growth will be far from stellar with a
0.1% contraction pencilled in for this quarter followed by just
a 0.1% expansion in the next. That will be followed by 0.2%
growth in the following two quarters, according to forecasts
barely changed from February.
Across this year as a whole the economy will expand 0.5%
before growth accelerates to 1.2% in 2024.
(Other stories from the Reuters global economic poll: )
(Reporting by Jonathan Cable; Polling by Susobhan Sarkar and
Vijayalakshmi Srinivasan; Editing by Hugh Lawson)
