ECB to raise deposit rate to 0.75% by year-end – Reuters poll

The European Central Bank (ECB) will raise its deposit rate above zero for the first time in a decade in September, according to most economists polled by Reuters. The survey also reflects the expectations of a rate hike of at least 50 basis points higher than previously expected by the end of the year.

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The survey conducted between June 15 and 22 showed that all but two economists expected the ECB to make a quarter point hike on July 21, to -0.25%.

Two expected a rise of 50 basis pointscompared to none in the latest survey.

A large majority, 91%, or 50 of the 55 economists, expected the central bank to raise its interest rate by 50 basis points in Septembertaking the deposit rate out of negative territory at 0.25%.

Last month, analysts expected the ECB to wait until the fourth quarter to move the deposit rate, currently at -0.50%, into positive territory.

About 60%, or 33 of 55 economists, saw another 25 basis point hike in October and about 85%, or 47 of 55, expected the same hike in December, bringing the deposit rate to to 0.75% at the end of the year.

However, some forecasts for the level of interest rates at the end of December were as high as 1.25%, highlighting the possibility of larger moves.

The survey forecast increases of 25 basis points in the first, second and third quarters of next yearwhich would take the deposit rate to 1.50%, within the terminal rate range of 1.25%-1.50%.

The economy is expected to grow by 2.6% on average during 2022 and to expand by 1.8% next yearaccording to the median forecast of some 70 economists.

More than 70%, or 25 of 34 economists, said in response to an additional question that eurozone inflation had not yet peaked. Twenty said it would happen in the third quarter, four said this quarter, and one said in the fourth quarter.