ECB likely to keep rates high until second half of next year
4% Ecb Is At Of Around Deposit Year Its Both Meetings Increases Predicted July Until And And To Rate Next September The Rate Second Sanction Keep Half The
A quarter-point rate hike is all-but a done deal when the European Central Bank meets next Thursday, but the central bank will be slow to start cutting rates, a leading consultancy has predicted.
The assessment from Capital Economics comes after some economists monitoring the latest remarks of ECB decision-makers said that July's rate rise could be its last since it started hiking rates last summer, and that the central bank will forego a further quarter-point increase when it returns from its holiday break for its September gathering.
However, Andrew Kenningham, chief Europe economist at Capital Economics, has predicted the ECB will sanction rate increases at both the July and September meetings, and then keep its deposit rate around 4% "until the second half of next year before beginning to loosen policy".
Mr Kenningham said the details of the latest eurozone inflation reading will do little to settle the ECB. "Indeed, the breakdown is not particularly reassuring," he said.
"So there’s not much here to reassure the governing council," the chief economist said.
Capital Economics said the outlook for the eurozone was little changed.
The eurozone avoided a winter recession, revised data showed, as the economy stagnated at the start of this year instead of shrinking as previously thought.
Eurostat reported yesterday that output was flat in the first three months of the year. That is up from a prior reading of fall of 0.1%, which — combined with a decline of the same magnitude at the end of 2022 — had suggested the first six-month contraction since the covid pandemic.
“As the impact of the energy shock passes, it is giving way to a squeeze from tight monetary policy. That’ll keep growth slow for the rest of the year,” said Jamie Rush, chief European economist at Bloomberg.