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Poll suggests ECB may wait until Q4 to raise rates, but several banks expect a series of Fed rate hikes this year.

According to a Reuters poll, the European Central Bank (ECB), may wait until Q4 (the last quarter of the year) before raising its first interest rate for more than ten years. 

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Poll suggests ECB may wait until Q4 to raise rates, but several banks expect a series of Fed rate hikes this year.

According to the poll's author, "fewer economists" believe the ECB would raise its benchmark rate sooner after the conflict in Ukraine. A number of financial institutions around the world are betting on the Federal Reserve's rate rise timeframe and how high rates will go this year.

Economists Place Bets on European Central Bank Rate Increases During the Conflict in Ukraine

Economists and financial analysts debate whether central banks will raise interest rates in the current conflict in Ukraine. Economists have stated that it is possible for central banks to not raise rates or reduce large asset purchases, while the war continues. Reuters, an international news agency that Thomson Reuters owns, published a survey suggesting the European Central Bank (ECB), will not raise rates until Q4.

Jonathan Cable and Swathi Nair, authors of the article, claim that consensus is based on a "slight majority" of forecasters. Despite rising European inflation, the poll's results show that 27 percent of the 45 respondents agreed that the ECB should wait until 2022. Reuters conducted the current poll from March 1-4. The news agency published the same question to economists last months. The incident in Ukraine has led to "fewer economists" expecting the ECB's rate hike sooner.

The study details that only six economists predicted the first hike would occur sooner than expected, in the third quarter. This is down from 16 who voted in a poll last month. Speculations and bets on whether the ECB will raise the interest rates at its March 10 policy meeting have increased. Economists at Rabobank stated in a client note that the war shouldn't change the ECB’s goals. According to Rabobank economists, "The war has not really changed the difficult combination inflation and growth risks. It has only exacerbated them." In a client note, the economists added:

It should therefore not change fundamentally the ECB’s plans to withdraw some accommodative policy gradually and cautiously.

Global Investment Banks Predict Fed Rate Hikes

The Federal Reserve's possibility of raising interest rates is a hot topic. Although the U.S. Federal Reserve is expected to increase the benchmark interest rate this month, the war in Ukraine could delay this decision. A number of global investment banks had predicted rate increases this year before the conflict in Europe.

Mid-February, Goldman Sachs Group Inc's economics stated that they expected seven quarter point increases by year's end. Another report states that Citi expects Citi to increase its rate by 150 basis points in 2022, while BNP Paribas anticipates six rate increases with an average of 150 bps. Morgan Stanley predicts the Fed will rise to 175 bps, as does JPMorgan. HSBC estimates that the Fed will increase its interest rate by 50 bps in this month and four more this year.

People are predicting that the Fed and the ECB will raise interest rates. This means that large-scale bond purchases from both banks will cease this month. The U.S. Federal Reserve reports that the bank will "purchase approximately $20 Billion over the monthly period", which began on February 14th and ends on March 11. The ECB's pandemic-related stimulus programme used 20 billion euros to buy bonds. This month, the buying will be stopped.


 

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