Nordea economists Jan von Gerich and Tuuli Koivu expect the European Central Bank (ECB) to raise interest rates by 25 basis points at its June meeting and signal a hawkish stance without firm initial commitments. They forecast four further increases of 25 basis points, raising the deposit rate to 3% by October, while noting downside risks and highlighting expert forecasts that continue to show inflation above target.
The ECB has seen four interest rate increases
“The ECB will raise interest rates by 25 basis points next week and is likely to provide a hawkish assessment of the outlook – although without any preliminary commitments.”
“We continue to believe that, absent further weakening in economic momentum, more signs of deepening inflation pressures will lead to another 25 basis point increase at the July meeting.”
“In fact, we still expect four further 25 basis point rate increases, which will take the deposit rate to 3% in October.
“However, baseline expert forecasts of a total of around three rate increases and still likely to remain above the target in the coming years point to further increases in the future.”
“Taken together, these adjustments – higher inflation and lower growth in the short term – would bring the baseline closer to the ECB’s March unfavorable scenario and correspond to the views recently expressed by, for example, Isabel Schnabel on the euro area economy.”
(This article was created with the support of an artificial intelligence tool and has been reviewed by an editor.)
