How high will the European Central Bank raise interest rates in 2023? | markets

Monetary tightening is here to stay. With inflation in the Eurozone at 9.9%, Christine Lagarde is determined to do whatever it takes to restore price stability. Since the European Central Bank finished six years from zero rates in JulyThe Board of Directors raised interest rates by 200 basis points. The central bank headed by Lagarde warned that the rise in money prices will continue in the coming months, although it will continue at a more moderate pace. The Bloomberg Consensus puts the revised rate at 2.5% in March 2023 and raises it to 2.7% in September, lower than the 2.82% expected a day before the European Central Bank agrees to raise rates for the second time in a row.75 basis points.

Analysts expect the institution to continue raising interest rates, but at a slower pace. The first test will come in December. Amundi Investment is a proponent of this idea. Company experts expect a 50 basis point rise at the end of the year and Softer climbs in 2023. As a result, they set the rate at 2.5%, in line with Generali Investments’ expectations.

Jesús Sáez, head of capital markets at Iberia in Natixis, notes that the market expects two more increases before the ECB stops along the way. The rate of these spikes is set in the range of 25-50 basis points, until a maximum rate of 2.6% is set in July 2023.

Companies like Nordea and Berenberg expect monetary policymakers to halt the tightening cycle in February after the deposit rate – the interest rate at which the European Central Bank rewards overnight deposits – reaches 2.25%, compared to the current 1.5%. “Given the stability of energy prices and the underlying effect, inflation is likely to decline significantly in 2023. During the winter, it will be increasingly clear that the Eurozone economy has entered a recession. We expect the European Central Bank to raise interest rates. By only a quarter of a point in February.

Although Lagarde at this week’s meeting was more pessimistic about the economic outlook, and acknowledged that recession risks have increased, Morgan Stanley believes the slowdown in growth will do little to reduce inflationary pressures. In other words, negative GDP expectations may not have any effect on prices. In this scenario, entity experts expect an additional 25 basis points increase in March.

Commerzbank strategists are by far the most aggressive. Although they consider it unclear that the ECB will repeat the 75 basis point move, they believe that there are still compelling arguments to justify a third rate hike by this rate. They noted that “inflation will remain very high in the coming months and surveys show consumers expect prices to grow by 3% within three years.”