Reuters survey showed markets are now priced in the prospect that the European Central Bank will pause its rate-hike campaign in September, but a further rise is still possible by year’s end due to rising inflation.
Since July 2022, the European Central Bank (ECB) has carried out nine rate hikes, the most recent of which was 25 basis points last month, bringing the benchmark rate to a current of 3.75%-4.25%.
Of the 70 economists polled, 37 (or 53%) expected the ECB to leave its interest rate at 3.75%, in line with market pricing, at its meeting on September 14. This was an increase from the 47% that expected a rate pause in the previous month’s poll.
The Reuters survey also found that 53% of participants anticipate a deposit rate hike to 4.00% later this year, with 33 economists predicting September and 4 predicting either October or December.
For September, markets are pricing in a halt at over 60% probability, but for year-end, they are more evenly split, with slightly over 50% chance of a 4.00 deposit rate by then.
