ECB to hike rates before the next downturn – Reuters poll

According to a poll of economists undertaken by Reuters, many are expecting the European Central Bank (ECB) to lift rates sometime in the second half of 2019, which respondents believe will happen before the next potential economic downturn.

Key quotes

“Euro zone growth outpaced that of its major peers last year for the first time since the 2007-08 financial crisis. But the latest poll of more than 100 economists, taken July 10-18, suggests growth momentum has already peaked.  An escalating trade row between the United States and its trading partners remains a real risk to the euro zone and has prompted many economists to trim their growth forecasts.

Gross domestic product growth was forecast to average 2.1 percent this year, 1.8 percent next and 1.6 percent in 2020, slightly lower than the 2.2 percent, 1.9 percent and 1.7 percent predicted, respectively, last month.  Still, more than 70 percent of economists – 51 of 69 – who answered an additional question said they were confident the ECB would hike rates before the next economic downturn. Eighteen economists said they were not.

“We are reasonably confident that the ECB will raise rates before the next downturn, but the risk of this not happening has clearly risen with the accelerating trade war, which has come amidst signs of slowing growth momentum,” said Elwin de Groot, head of macro strategy at Rabobank.”