Consensus Forms Around ECB's June Rate Move
A fresh market survey conducted between April 9 and 15 reveals that economists, responding to geopolitical developments, have revised their inflation outlook for the Eurozone upward. The consensus now strongly points to the European Central Bank (ECB) initiating an interest rate increase of 25 basis points at its June policy meeting.
A Likely One-Off Hike: Short-Term Price Shock
Despite the near-term inflationary pressure, the prevailing analysis suggests this June hike will probably stand alone in 2024. The reasoning is that the ongoing conflict is seen as causing a temporary spike in prices, particularly in energy, rather than fueling a persistent, long-term inflation problem.
The Inflation Trajectory: Peaking Then Falling
The survey outlines a clear path for inflation over the coming years:
- 2024: The annual inflation forecast has been sharply raised to 2.8%, well above the previous 2% estimate.
- 2025-2026: A disinflation process is expected, with the rate projected to fall to 2.1% by 2026.
- 2027: Inflation is anticipated to settle at 2%, aligning perfectly with the ECB's medium-term target.
April Meeting: Holding Steady is the Base Case
Insights from policy circles indicate that ECB officials currently favor keeping interest rates unchanged at their upcoming meeting in late April, opting for a cautious stance before a potential June move. However, some Governing Council members, including the Bundesbank President, have not entirely ruled out action in April, leaving a minor degree of uncertainty.