Following the recent large rate hike by the ECB, experts have again raised their inflation forecasts for the euro area. In any case, interest rates will probably have to be raised at some point. Yet there are already first voices that see a first turn for the better.
Economists now expect consumer prices in the euro area to rise by 5.9 percent this year, the European Central Bank (ECB) announced on Friday. In October 2022, they had predicted a 5.8 percent increase. The new forecast is slightly further away from the ECB’s target of 2%, which experts say is the optimum level for an economy.
The economists raised their forecast for core inflation this year, excluding prices for energy, food, alcohol and tobacco, to 4.4 (3.9) percent.
Next jump in interest rates probably in March
Most recently, the headline rate of inflation had moderated significantly as a result of declining increases in energy prices. According to a first estimate, inflation in the euro area was still 8.5 percent in January, after 9.2 percent in December. However, core inflation, excluding volatile energy and commodity prices, remained at 5.2 percent.
The ECB is countering this with sharp rate hikes: at its interest rate meeting on Thursday it raised the key rate by 0.50 percentage point, as in December, and announced the next half percentage point increase for March.
The end of interest rate hikes is approaching
According to the head of the Lithuanian central bank, Gediminas Šimkus, inflation is slowly turning positive. The ECB council member told journalists in Vilnius that the end of rate hikes by the European Central Bank (ECB) could be getting closer. “I think we’re already moving toward that final rate,” he noted.
Nevertheless, monetary watchdogs could follow the 0.50 percentage point rate hike announced in March with another in May of the same volume or 0.25 percentage point.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
