Money

ECB survey shows rising inflation after rate hike

Inflation in the eurozone is set to stay above two percent for the foreseeable future, according to an economists survey published by the European Central Bank, which policymakers consulted before raising rates for the first time in 11 years.

Professional forecasters in the survey “revised up their inflation expectations for all (time) horizons”, the ECB said in a statement.

For 2022, 2023 and 2024, the economists raised their predictions to 7.3 percent, 3.6 percent and 2.1 percent respectively.

Inflation in the eurozone hit 8.6 percent in June, an all-time high for the currency club and well above the ECB’s two-percent target.

The upward revisions “mainly reflect higher energy and food prices”, as well as the pass through of higher input costs in production, the ECB said.

The ECB’s governing council had access to the forecast on July 21 as they agreed a surprisingly large interest rate hike of 50 basis points, central bank sources told AFP.

The rate increase, the ECB’s first since 2011, was double the size of the move signalled by the central bank and brought an end to negative interest rates in the eurozone in a stroke.

“It is likely that this study influenced the governing council” and encouraged them to “send a strong signal to markets”,said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management.

Figures above the ECB’s target across the whole forecast may have prompted concerns over the “deanchoring” of inflation expectations that would make it harder to maintain price stability, said Carsten Brzeski, head of macro at the ING bank.

The possibility “must have made several ECB members extremely nervous”, he said.

Source
hurriyetdailynews

Leave a Reply

Your email address will not be published.

Back to top button