The European Central Bank is expected to raise deposit rates in July for the first time in more than a decade and pull it out of negative territory at its next meeting in September, despite a 30 percent chance of a recession within a year, according to a Reuters poll. economists have shown.

As inflation peaked at 7.5% in decades and almost every major central bank had raised interest rates in April, ECB President Christine Lagarde last week backed calls from politicians for an early rate hike.

The bank is expected to complete its bond-buying program in July and rise in a few weeks by 25 basis points, according to most economists surveyed May 10-16.

Until recently, forecasters expected the ECB to wait until the last quarter of the year to raise the rate on deposits, now it is -0.50%.

Of the 46 economists expecting deposit rates to rise in the third quarter, 26 said rates would rise by 50 basis points by the end of the period, implying a quarter-point change in both July and July meetings. September.

Another 18 respondents said the deposit rate would rise by only 25 basis points in the third quarter, and two said it would rise by only 10 basis points to -0.40% by the end of the quarter.

An even clearer majority expects that by the end of the year rates will cease to be negative.

About 90% of economists, or 43 out of 48, said that by then the rate on deposits will be 0% or higher, with 44% or 21 out of 48, saying that by then it will be at 0.25% and 8% , or 4 out of 48, saying it would be at 0.50%.

“There is widespread support for ending negative interest rate policies at the ECB, but they will be very cautious about normalizing policies in light of significant macro-uncertainty and concerns about slowing growth,” said Jens Eisenschmidt, Morgan’s chief European economist. Stanley.

“This will be the first time in ten years that the ECB has raised rates without support from asset purchases, so smaller steps will allow the ECB to monitor market reactions, probably with possible fragmentation of euro area funding conditions a key concern.”

The latest survey results still lag behind exchange rate futures, which set the price at a total of 90 basis points for rate increases by the end of the year or three to four 25 basis points.

Even this will leave the ECB far behind the US Federal Reserve, which currently expects the rate on federal funds to be around 2.00-2.25% by the end of this year.

However, the poll also found that the temporary window for raising rates closes for the ECB with a stable average recession probability of 30% over the next 12 months as the war in Ukraine pushes energy prices and undermines consumer payments.

The bloc’s economy was expected to grow by 0.3%, 0.5% and 0.6% in the second, third and fourth quarters.

This is a decrease from 0.4%, 0.6% and 0.6% projected last month.

On an annual basis, it is expected to grow by 2.7% this year compared to 2.9% and 2.3% next year, as forecast last month.

The European Commission has lowered its eurozone growth forecast for this year to 2.7% from 4.0% projected in February, and has raised its inflation forecast to 6.0% this year from 3.5%.

Rising inflationary pressures caused by persistently rising food and energy prices have exacerbated the cost of living crisis in the eurozone.

This quarter, prices will rise by 7.7%, which is three times higher than the ECB’s target of 2.0% and higher than the forecast of 7.3% given last month.

In the coming quarters it will gradually decrease, but the medians have not shown its target until next year, the forecast horizon.

Asked what impact the cost of living crisis will have on growth, 19 out of 25 economists said it would be serious and two very serious.

Only four said it would be soft.

According to 90% of respondents to another question, it will take more than six months before the crisis will significantly weaken.

Despite the risks of recession, unemployment in the single currency bloc is expected to remain at a record low of 6.9% and 6.8% this year and next.

Meanwhile, average wage growth this year was expected at 3.0%, the median poll showed.

“Although the current dynamics are raising wage demands, companies are still cautious due to the weakening forecast,” said Bas van Geffen of Rabobank.

“Therefore, anecdotal data also point to abbreviated wage agreements so that next year there is flexibility to adjust, higher or lower, depending on inflation. So far, it still looks mostly catching up on wages, not promising. ”

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