ECB Expects Eurozone Inflation to Exceed 3% in 2024
The European Central Bank expects inflation in the Eurozone to remain above 3% next year, reinforcing arguments for the tenth consecutive interest rate hike.
This information has been reported by Reuters.
The European Central Bank begins a two-day meeting on Wednesday as persistently high inflation and growing recession fears pull policymakers in opposite directions, keeping market expectations evenly split between a pause and another 25-basis-point hike.
A representative from the European Сentral Bank declined to comment.
The European Сentral Bank's quarterly projections, to be presented to the Governing Council on Wednesday, will show inflation at 3% in 2024, a source said, underscoring expectations for only a modest downgrade.
The updated 2024 projection significantly overshoots the central bank's 2% target and is above June's forecast for 3%, and also exceeds the 2.7%in a Reuters poll of economists.
The source said the rate decision remains unsettled, and formal proposals for the meeting have not yet been submitted.
But the 2024 figure, closely watched by markets, adds to arguments for rate hikes as it seems to confirm fears that taming inflation might be harder than thought earlier.
The European Central Bank has raised its deposit rate by 375 basis points from minus 0.5% over 14 months, the fastest pace of tightening in its history, in the hope of curbing rapid price growth.
However, both headline and core inflation remain above 5%, increasing the risk that workers will demand higher wages, especially as the labor market remains extremely tight.
While the European Сentral Bank's inflation forecast for 2025 is unlikely to change significantly, it is not the main topic of the discussion among policymakers due to the low track record of forecasts in recent years.
On the other hand, growth will be lowered for this year and 2024, roughly in line with market expectations, the source said.
Economists polled by Reuters see Eurozone growth at 0.6% this year and 0.9% in 2024.
As reported by The Gaze, Poland's leading opposition party has announced that it will seek to take the head of the country's central bank, Adam Glapinski, to court for his inability to tame inflation if it wins next month's elections.