(BFM Bourse) – The credit rating agency Fitch Ratings does not think that the European Central Bank will be able to follow in the footsteps of its American counterpart in raising key rates for two years.
The ECB is unlikely to follow the US Federal Reserve in raising interest rates in the next two years, Fitch Ratings said in a macro note.
In its latest economic projections, the European Central Bank (ECB) has certainly revised its inflation forecasts upwards, but the figure now expected, i.e. +1.8% in 2023 as in 2024, remains below the inflation target. that the institution has set itself. Price pressures have increased significantly in recent months, she acknowledges, but these pressures are still seen as largely temporary, reflecting a sharp rise in energy prices as well as international and domestic supply asymmetries. and demand in a context of reopening economies. Energy prices are expected to remain high, on average, in 2022 but moderate significantly over the course of the year as downside base effects strengthen due to the projected decline in oil, gas and electricity prices.
With the gradual dissipation of bottlenecks on the supply side, the rise in the consumer price index excluding energy and food products should also slow during 2022, according to the ECB. In fact, Fitch Ratings notes that “core” inflation is much lower in Europe than it is currently in the United States.
Drivers of inflation expected to weaken in 2022
Moreover, the history of the ECB’s forecasts shows that it has demonstrated a recurrent excess of optimism in this area, in the sense that the inflation rate has not managed to come down for years. raise to the 2% medium-term objective considered desirable: over the last decade, the average has been around 1% and Fitch’s econometric models predict rather 1.5% excluding energy and food. In other words, the agency does not believe that the medium-term acceleration in prices is sufficient to justify a rate hike by the ECB’s own criteria.
“Temporary factors currently driving inflation, including constraints on global supply chains, high energy prices and comparison base effects, are expected to ease in 2022. Wage growth and expectations inflation [de la part des agents économiques] seem unlikely to increase inflationary pressure sufficiently, as these factors are currently relatively well anchored”. , without really slipping, remains high over a period long enough to influence wage negotiations.
“Surprises on the side of wage growth or inflation expectations, or more persistent than expected constraints on the side of supply chains, could increase the risk of an earlier than expected first rate hike – maybe in 2024,” said Tej Parikh, head of economics at Fitch Rating. “However, at this stage, we do not expect the dynamics of core inflation in the euro zone to deviate significantly from the past trend.”
Guillaume Bayre – ©2022 BFM Bourse