The European Central Bank (ECB) is likely to raise its key interest rates again this Thursday. According to a survey, the majority of economists expect an interest rate hike of 0.25 percentage points. This would increase the deposit rate, which also plays a certain role in savings interest, to 3.25 percent.
Christian Siedenbiedel
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Frederic Ducrozet, an economist at Pictet, says: "The inflation outlook remains subject to upside risks despite the continued tightening of credit conditions, while the economy has proven to be much more resilient to higher interest rates and financial stress," he says.
However, an increase of 0.5 percentage points is not yet ruled out if the inflation data for the euro area, which will be published this Tuesday, are significantly higher than expected, said Marco Wagner, ECB expert at Commerzbank. ECB Executive Board member Isabel Schnabel had indicated that this possibility should not be ruled out prematurely.
Sharp decline in the inflation rate does not continue
The inflation rate in the euro area was 6.9 percent in March, down from 8.5 percent in February. However, it is expected that this decline did not continue in April. The core rate of inflation, i.e. inflation excluding the strongly fluctuating prices for energy and food, which is currently the focus of monetary policy, even 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 pointed out that core inflation is currently "much more persistent than headline inflation".
It will be interesting to see whether, in return for a rather moderate interest rate hike, the ECB will commit itself to one point with regard to its future actions. Karsten Junius, economist at Bank J. Safra Sarasin, thinks 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: "Both the hawks, i.e. the advocates of tighter monetary policy, and the doves, the advocates of loose policy, could be satisfied with this."
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 of 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 investment bank Goldman Sachs, now expects three interest 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 had said that the risks to price stability were on the upside: "It is therefore not self-evident that we will return to price stability in the medium term."