Eurozone inflation to be higher than expected by 2025-ECB
2022.12.14 05:02
Eurozone inflation to be higher than expected by 2025-ECB
Budrigannews.com – One source told Reuters that the European Central Bank expects inflation to remain above its target of 2% for the next three years. This is higher than what the markets currently anticipate, indicating that the bank’s fight against price inflation is far from over.
On Thursday, the European Central Bank (ECB) will most likely raise interest rates for the fourth time in a row to control inflation. It will also release new quarterly economic projections that investors can use to figure out how many more increases may be coming.
Driven by factors going from Russia’s attack of Ukraine to the effect of pandemic-time boost, expansion across the 19 nations that utilization the euro arrived at 10.6% in October prior to falling back the month before.
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The source, who spoke on condition of anonymity because the forecasts are not yet public, stated that the new projections will place inflation comfortably above 2% in 2024 and slightly above it in 2025.
The new forecasts are higher than the market currently anticipates for those two years, making them crucial to the ECB’s policy decisions until a new round of estimates is released in March.
A spokesperson for the ECB declined to comment.
Because it targets “medium term” inflation rather than current inflation and because any change it makes takes several months to work its way through the economy, the ECB uses its forecasts as an input into its decisions even though they rarely prove to be accurate.
Recent statements of skepticism regarding the ECB’s forecasts and calls for a greater focus on current readings have been made by some policymakers, particularly “hawks” who advocate for higher interest rates.
According to Reuters’ poll of economists, inflation will reach 6.0% in 2023, 2.3% in 2024, and 1.9% in 2025. Additionally, they anticipated that the ECB would raise its deposit rate by 50 basis points on Thursday to 2%, followed by increases to 2.5% in March and 2.75 percent in the middle of next year.
Out of the 5 trillion euros that the ECB owns, it is also thought that it will let 175 billion euros (186.01 billion) worth of debt expire next year in order to steal cash from the banking system and raise costs for long-term borrowing.
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Some members of the ECB’s Governing Council, like Bundesbank President Joachim Nagel, want this “quantitative tightening” to begin by March, while members who are more dovish want it to start later.
