The European Central Bank will raise its key interest rate as early as September 10 — and then stop. That is the consensus of 65 economists polled by Reuters in late August and early September.
The poll showed: all respondents expect a hike in the deposit rate by 0,25 percentage points, to 2,50%. The ECB last raised rates in June, and now, according to the majority, the cycle is close to its end.
This would be the shortest tightening campaign in 15 years — since 2011, when the bank twice responded to a spike in oil prices. Those decisions were later widely called a mistake.
Inflation in the euro zone accelerated to 3,3% in August — above the target of 2%, but the rise is mainly due to energy. Economists see no broad price pressures here.
"It is hard to imagine the ECB wanting to add fuel to the fire amid fiscal problems and a sharp rise in bond yields," noted Carsten Brzeski, global head of macro at ING.
91% of respondents expect the rate to stay at 2,50% until the end of the year, and 78% — until mid-next year. That is noticeably higher than in the previous poll.
"After September, they will stop because inflation, in our estimates, will still approach the target over the next year," says Pia Fromlet, euro zone economist at SEB.
However, risks remain. The ongoing conflict in the Middle East and rising prices for diesel, gasoline, and food could push up short-term consumer expectations and even lead to wage growth.
The euro zone economy is projected to grow by 0,8% this year and 1,2% in 2027. Against this backdrop, the ECB, according to the poll, is not ready to risk a recession to fight a purely supply-side shock.
So, should markets that are pricing in a third hike reconsider their expectations?
