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Draghi May Lift ECB Interest Rate Before Leaving

Draghi May Lift ECB Interest Rate Before LeavingDraghi May Lift ECB Interest Rate Before Leaving

Mario Draghi will squeeze in one interest rate increase before his term as European Central Bank president ends next year, according to a Bloomberg survey of economists.

Most respondents pushed back their expectations for a hike to September 2019, the month before Draghi is due to leave. The change is a response to policy makers’ guidance that rates will remain at record lows at least through the summer.

Barring a serious escalation of trade tensions or deterioration in the outlook, asset purchases are forecast to end this year, as announced, and economists don’t expect an update on the policy path until March.

The next governing council meeting on Thursday is likely to be a quiet affair, with Citigroup economists saying the ECB is on “auto-pilot for the foreseeable future”.

After policy makers took a leap toward unwinding unprecedented stimulus in June, Draghi reiterated his confidence in a sustained pick-up in inflation when addressing European lawmakers last week. He also emphasized that monetary support would remain substantial even after net bond buying stopped.

Economists predict the ECB will raise its deposit rate to minus 0.2% from minus 0.4% by September next year. An increase in the main refinancing rate, currently at zero, is seen by December 2019, after Draghi retires from the central bank. The timing of those forecasts was changed from the second and the third quarter, respectively.

An intensifying global trade conflict poses the biggest risk for the eurozone economy, the survey shows. Piet Christiansen, senior economist at Danske Bank, says he’s watching confidence indicators carefully for any reaction to the spat between the US and its partners.

 

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