The European Central Bank is expected to raise the deposit rate for the first time in over a decade in July and bring it out of negative territory at its following meeting in September, despite a 30% chance of recession within a year, a Reuters poll of economists showed.
With inflation hitting a multi-decade high of 7.5% in April and almost every other major central bank having already raised interest rates, ECB President Christine Lagarde backed calls for an early rate hike by policymakers last week.
Another 18 respondents said the deposit rate would only rise 25 basis points in Q3 and two said it would only climb 10 basis points to -0.40% by the end of the quarter. "This will be the first time in over a decade that the ECB is lifting rates – with no support from asset purchases – so taking smaller steps would allow the ECB to observe the reaction in markets, with a possible fragmentation of financing conditions in the euro area likely a key concern".The latest poll results are still lagging rate futures, which are pricing in a cumulative 90 basis points of rate increases for the rest of the year or between three and four 25 basis-point moves.
On an annual basis, it was expected to grow 2.7% this year, down from 2.9% and 2.3% next, the same as predicted last month.
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