by Jonathan Cable
LONDON (Reuters) – A call for the European Central Bank to raise interest rates by an unprecedented 75 basis point next week Reuters The poll found that while very few economists said inflation would be more tame, they were in jeopardy as inflation soared. The ECB didn’t start raising borrowing costs until July, when it raised borrowing costs for the first time in more than a decade. The lag has put increasing pressure on the euro, which is currently trading below parity against the dollar.
The ECB’s larger-than-expected basis point hike in July 50, the biggest move in more than 20 years, leaves many feeling Accident. The refinancing rate is reduced to 0.50%.
But this is obviously just the beginning, the inflation rate in the euro area is more than the central bank 2 % target, hitting a record 9.1% last month.
Now, however, the ECB faces the prospect of aggressive rate hikes, while the economy is almost certain to enter a recession, with a high probability of a median within a year 60% compared to 32% in the July poll.
Among the 37 Economists in August, 31 less than half. 25 – September 2 polls, expected to be revised up Thursday 70 basis points, while 25 means that the central bank will provide 29 basis points. Only four expected a modest 25 basis point hike.
Among euro area market makers, most support 75 basis point changes, 18 of26. In fact, financial markets are now pricing in such a huge move, and over the past few days, many economists have shifted their views to 75.
The US Federal Reserve has raised 75 basis points and the Bank of Canada raised its key rate by 100 points in July basis points, and may increase by another basis point 60 next week.
In Jackson Hole, Wyoming, and subsequent central bank meetings, ECB policymakers called for decisive and swift action to fight inflation, with a clear choice at next week’s policy meeting to be in 32 and 60 basis points.
“It’s still a very close decision – the debate is very complicated, but the recent communication combined with the unexpected upside in the headline in August, especially core inflation, means a bigger than in July A move is now slightly more likely,” said Ruben Segura-Cayuela, European economist at Bank of America.
More than half of the responses 37 of 31 The dent sees
a base point hike at the October meeting to bring the refinancing rate to 1.32%, Three of them are expected to make one more 75 basis point change. 17 said 25 basis points, while the rest forecast no rate hikes by then.
30 Economist 32 Projected 60 December basis point change, with 17 Expected 50 and then someone said 75.
The median in the poll says the same as 1.17% in in the July polls. When asked if their predicted risk was biased, the overwhelming 37 37 ) said it was higher than they currently expected.
Recent data paints a bleak economic outlook as consumers feel pressure from deepening cost-of-living crisis to cut spending, expected to be flat for the quarter .
will contract by 0.3% in the next quarter and then by 0.2% in early 2023, meeting the technical definition of a recession. In July, those forecasts were for 0.2% growth in both quarters. On an annual basis, it will grow 2.9% this year before slowing to a paltry 0.4% in 2023.
The probability of a recession within a year rises sharply to a median 60% to 60 %, which is a strong indication that a recession has already begun, given the usual reluctance to forecast recessions in advance.
Median forecasts show inflation peaking at 9.0% in the current and next quarters before gradually falling, but not in the ECB’s target across the entire forecast horizon until next year. In the July poll, forecasts for the third and fourth quarters were 8.5% and 7.8%, respectively.
but possibly in 12.0% later this year, although forecasts range up to 17%.
(Additional coverage from Reuters Global Economic Survey: