ECB to delay rate hikes to next year – Reuters poll

The latest Reuters poll of economists showed that a majority of them believe that the European Central Bank (ECB) is likely to keep the interest rates at record lows until next year, in the face of dwindling Eurozone economic growth.

Key Findings:

“ECB will soon re-launch its offer of long-term loans to banks.

But over 60 percent of economists said there would be no change to rate guidance at its March 7 policy meeting or any official announcement yet of long-term loans.

Over 90 percent of respondents are now forecasting the ECB will dole out new cheap loans to banks, with 84 percent of those offering a view expecting that to happen before July.

A new Targeted Long-Term Refinancing Operation (TLTROs) scheme could be launched as early as March, some respondents said.

A wafer-thin majority “” 32 of 63 economists “” now predict the deposit rate, currently at -0.4 percent, won’t rise until next year. In a poll taken last month, a majority still expected a hike by the end of this year.

The ECB is now forecast to wait until the second half of next year before raising the refinancing rate, compared with the first quarter of 2020 in the January poll.

Euro zone growth and inflation forecasts were cut again in the latest Reuters poll of about 100 economists, taken Feb. 22-28.

Gross domestic product growth was forecast to grow 1.3 percent this year, the lowest since polling began for this period over two years ago. It was the fourth consecutive cut to 2019’s outlook.

Asked about the likelihood of a euro zone recession in the next 12 months, the median response from over 50 economists was 25 percent. But the probability of a recession in the next two years was 35 percent.

Inflation was not forecast to reach the ECB’s target of just under 2 percent until at least 2022. It was forecast to average 1.4 percent this year, down from 1.6 percent predicted in January, and to average 1.6 percent next year and in 2021.”