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Reuters, ECB rate hike likely



Shrutee Sarkar

The European Central Bank (ECB) has missed a chance to raise interest rates until the recession next month, according to Reuters poll, many of which are not convinced.

Nearly 90% of economists surveying additional questions in the survey after the ECB proposed new long-term loans to banks at the end of this year said they would no longer buy assets by the end of 2020, at least.

According to a survey of about 100 economists by the ECB, the ECB has lowered its growth forecast for 2019 to its lowest since the polls began over two years ago. Inflation is not expected to raise the ECB's target by at least 2022.

The ECB forecasts that it will not raise interest rates by the second half of next year compared to last month's survey. More than 60 percent of economists who answered additional questions said they were not confident that the central bank would raise them before the next recession.

Peter Vanden Houte, ING's chief economist for the eurozone, said, "The cycle has already reached its peak and we have already entered a downturn.

"The ECB seems to have missed the bus because of the interest rate hike, but if the economy falls into a more severe recession, there is no scope to do more with existing tools," he said.

Reuters Survey on Euro Zone Recession Probability: https://tmsnrt.rs/2ECEnl1?eikon=true

Reuters poll on economists' confidence in the ECB rate hike: https://tmsnrt.rs/2FaQmq2?eikon=true

The survey was conducted in the context of the global economic slowdown, the US – China trade dispute, and the British recession that left the European Union (EU), and found economists slowing economic growth.

Luigi Speranza, senior chief economist at BNP Paribas, said: "We are shocked that the eurozone has been out of recession. The ECB is expected to hold the interest rate in 2019 and 2020. The ECB There is a possibility that it will be transformed into a way to relax the conditions. "

A series of weak economic reports confirmed a slowdown in the eurozone's growth, including 0.2% growth in the fourth quarter, Italy's economic slowdown, the eurozone's third largest economy and Germany's biggest miss.

According to polls, the quarterly economic growth rate is expected to be 0.3%, but the average economic growth rate in 2019 has dropped from 1.3% to 1.2%.

Inflation is expected to fall to 1.4% this year. It is expected to be 1.5% next year and 1.7% average in 2021.

However, the probability of a recession in the eurozone next year and the next two years fell from 25% and 35% in the previous survey to 20% and 30%.

Some economists have pointed to the ECB's new Long-Term and Long Term Reforming (TLBRO) proposal, one of the reasons to reduce the probability of a recession.

"Due to the negative impact we've seen over the last few months, banks will pay more attention to credit expansion, and now ECT has used the new TLTRO to mitigate that risk to some extent," said Elwin de Groot, The responsible person.

"TLTROs can stop further weakening the economy, but they will not actually stimulate growth," he said.

Some others said the TLTRO would be more effective by keeping the liquidity stable in the euro zone.

"In the case of TLTROs, the ECB could prevent a credit crunch and given that many banks will replace the existing TLTRO, which is trying to mature the new TLTRO," said ING's Vanden Houte.

(Additional report by Richa Rebello, voting by Sumanto Mondal and Manjul Paul, edited by Ross Finley and Larry King)


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