A Reuters poll of 85 economists, taken between April 17 and Wednesday, indicates the European Central Bank (ECB) is likely to keep its deposit rate unchanged at 2% at its April 30 meeting and to raise rates in June.
All but one of the economists surveyed predicted the central bank would hold rates next week. Just over half of respondents expect a 25 basis-point increase in June as the ECB attempts to guard the euro zone economy against a potential destabilizing energy shock linked to the war in the Middle East.
Oil prices have risen during nearly two months of conflict in the Middle East, a surge that has pushed inflation above the ECB's 2% target. That upward pressure on energy costs has prompted financial markets to price in more than two interest-rate increases for this year and has eroded both business and consumer sentiment.
ECB policymakers have signalled a firmer stance on containing inflation than some other central banks, yet they have publicly downplayed the prospect of an immediate rate rise. Officials point to what they describe as insufficient evidence that higher energy prices are spilling over into broader, persistent price increases across the economy.
Economists polled did not form a consensus on the ECB's path beyond the June move. The lack of agreement largely stems from uncertainty about the extent of so-called second-round inflationary effects that could result from elevated fuel prices. That uncertainty leaves the outlook after June open to a range of outcomes depending on how energy-related price pressures evolve.
The central bank also faces the task of avoiding past policy errors referenced by economists in the poll. Two examples cited are the ECB's delayed reaction to rapid inflation in 2022 and a 2011 episode in which the bank raised rates twice within four months while commodity prices were rising - a sequence that contributed to a deterioration of the euro zone debt crisis.
With inflation now above target and energy costs playing a prominent role, the poll suggests that the ECB's near-term choices will hinge on whether signs emerge that higher fuel costs are spreading into broader wages and prices. The timing and magnitude of any further tightening remain contingent on that evidence, according to the economists surveyed.
Polling details - 85 economists surveyed between April 17 and Wednesday; nearly unanimous expectation of a hold on April 30; just over half expect a 25 basis-point increase in June.