BENGALURU, April 23 - A poll of 85 economists taken between April 17 and 23 indicates the European Central Bank (ECB) will maintain its deposit rate at the April 30 meeting but that just over half of respondents anticipate a quarter-point lift in June to counter an energy-driven inflation shock linked to the war in the Middle East.
The survey shows a split over the policy path after June. While the June increase is widely framed as precautionary insurance against potential second-round inflationary pressures from rising fuel costs, economists did not reach consensus on whether the ECB will follow with further tightening later this year.
Oil prices have climbed during nearly two months of conflict in the Middle East, sending inflation above the ECBs 2% target. Financial markets have priced in more than two increases for the year and sentiment among businesses and consumers has cooled as a result.
ECB officials have signalled a stronger determination than some peers to contain price pressures but have emphasised reservations about moving immediately. They argue there is insufficient evidence that rising energy costs, which are beyond the central banks control, are spilling over into broader inflation in the form of second-round effects.
Policymakers remain mindful of prior missteps. The bank is still influenced by its slower response to a rapid upsurge in inflation in 2022, and it is also cautious about repeating its 2011 approach when it raised rates twice in four months amid rising commodity prices, an action that is widely seen as exacerbating a sovereign debt crisis across the euro area.
Of the 85 economists surveyed, all but one predicted the ECB will hold the deposit rate at 2% at the upcoming meeting. Forty-four respondents forecast a June increase to 2.25%, while 40 expected no change in June.
Ruben Segura-Cayuela, head of European economics research at Bank of America, articulated the dilemma facing the ECB: "The ECB will try to avoid a repeat of 2011. They need to have some clarity that whenever they hike, theyre not going to have to undo that quickly. And thats a reason to move in June rather than in April," he said. "Theres still a scenario in which the ECB looks through the shock ... The risk is the activity will react a bit more negatively than we are expecting. That might create additional incentives to delay hikes. And once you delay hikes, at some point, you might decide not to hike at all."
Beyond June, views diverged sharply. Thirty-four of the 85 respondents expected at least one more rate increase by the end of the year. Anna Titareva, European economist at UBS, said precaution and forward-looking judgement could prompt two hikes: "The ECB doesnt have the luxury to wait for the second-round effects to show up in the data. If they do see it in the data, its already too late. And thats why we think they will deliver two interest rate hikes in June and September out of precautionary and forward-looking considerations."
At the same time, 35 of the 85 economists surveyed still predicted no rate changes for the remainder of the year. Jennifer Lee, senior economist at BMO Capital Markets, explained the conditional logic: "I think right now, if oil stays around the $100 mark, it will give the ECB cover to just sort of sit back and watch inflation expectations ... as long as theyre not getting out of control, thats valid reason enough for the ECB to stay on the sidelines," she said.
Brent crude averaged near $100 a barrel this month, exceeding the ECBs March baseline assumption of a $90 peak, though it remains under the banks $119 adverse scenario. Inflation, which rose to 2.6% in the most recent month from 1.9% in February, is now forecast by poll respondents to average just above 3% over the next three quarters and 2.7% for the year - broadly in line with the ECBs own projections.
Economic growth expectations in the poll point to subdued momentum. Quarterly growth was forecast at around 0.2% through the year, producing a 0.9% expansion in 2026 - a downgrade from the 1.2% expansion predicted in early March. The two largest economies in the euro area, Germany and France, were each forecast to expand by 0.7% and 0.9% respectively this year, which is a small downgrade from a January survey.
Summary
A narrow majority of economists in a mid-April poll expect the ECB to keep rates steady at the April 30 meeting and then raise the deposit rate by 25 basis points in June to address a war-driven energy shock that has pushed inflation above target. Views diverge sharply on subsequent moves, reflecting uncertainty about whether higher fuel costs will spill over into broader price increases.
Key points
- Poll of 85 economists (April 17-23) shows consensus to hold rates at 2% on April 30; 44 expect a June rise to 2.25%, 40 expect no change.
- Inflation climbed to 2.6% from 1.9% in February; Brent crude has averaged near $100 this month, above the ECB's $90 baseline.
- Markets have priced in more than two rate rises this year; business and consumer sentiment has weakened.
Risks and uncertainties
- Unclear second-round inflationary effects from higher energy prices - affects consumer price dynamics and corporate margins.
- Potential negative reaction in economic activity to tighter policy or persistent energy shock - impacts growth-sensitive sectors and employment.
- Volatility in oil prices relative to ECB scenarios (baseline $90, adverse $119) - affects inflation and market pricing.