Will interest rates be raised again? That's what the experts expect

2023-09-08 09:07:53

The European Central Bank (ECB) is likely to keep its feet still at its interest rate meeting on Thursday, according to a Archyde.com poll. Of 69 economists surveyed, a majority of 39 experts, or around 57 percent, expected the ECB to pause interest rates on September 14, according to the survey published on Friday.

On the other hand, 30 economists assumed that the central bank would increase the deposit rate, which is the key deposit rate on the financial market and which financial institutions receive from the central bank for parking excess funds, by another 0.25 percentage points to 4.00 percent. That would be the highest level since the start of the monetary union in 1999. Archyde.com asked economists about their expectations between September 5th and 7th.

Raised nine times in a row

Since the summer of 2022, the monetary authorities have raised interest rates nine times in a row in the fight against inflation – most recently by 0.25 percentage points in July. Overall, the euro watchdogs have raised the deposit rate by a total of 4.25 percentage points in just over a year. As recently as June 2022, the rate was minus 0.5 percent, which meant penalty interest for the banks. The key interest rate at which commercial banks can obtain fresh money from the ECB is currently 4.25 percent. The interest rate futures on the stock exchange currently show that investors there estimate the probability at around 64 percent that the ECB will pause interest rates next week.

Inflation has now halved since last year’s highs. But at 5.3 percent in August, the rate was still more than twice as high as the ECB’s target of two percent. The monetary authorities are also concerned about the increasingly deteriorating economic situation in the eurozone. The purchasing managers’ index for the private sector – industry and the service sector together – fell surprisingly significantly in August by 1.6 points to 47.0 points. Before the start of autumn, stock market investors are again more pessimistic about the economy, according to the monthly survey by the consulting firm Sentix. This is not an easy situation for the ECB. Because it wants to avoid as much as possible that economic activities are completely strangled as a result of its tightening policy.

According to the survey, economists are rather divided on the further interest rate path of the monetary authorities after the September meeting. While 36 of 69 economists surveyed – around 52 percent – expected the interest rate to peak this year at a deposit rate of 3.75 percent, 33 or around 48 percent expected that the ECB would raise the rate to 4.00 percent by the end of the year.