(Finance) – Analysts agree that the meeting of the European Central Bank (ECB) of March 16 will end with a new one official rate hike of 50 basis points, which will bring the deposit rate to 3.00%, and no surprises on long-term refinancing operations or APP/PEPP reinvestments. There is instead less certainty about next movesalso because on the occasion of the next meeting there will also be a revision of the staff’s projections and an update of the direction on the future trend of monetary policy.
According to the Studies and Research Department of Intesa Sanpaolothe sharp fall in the price of gas and the better-than-expected trend in economic activity in recent months should lead the ECB staff to review growth upwards and inflation downwards provided for in 2023. However, the ECB will continue to forecast core inflation above 2% in 2025.
In terms of monetary policy choices, “the Governing Council seems divided on the size and speed of the necessary monetary tightening in the coming months – reads the note signed by Luca Mezzomo, Head of Macroeconomic Analysis – The split reflects different opinions on the effects of the drop in energy prices on core inflation and on the occasional or recurring nature of the increases observed in the services sector. The assessments of the governors on the level of restrictiveness of the monetary policy also appear to be different”. I however, the markets are more inclined to believe the “hawks”, who are now aiming for rates above 4%.
Analysts believe it plausible that the ECB limits itself to indicating that further increases in official rates are probable, without going too far to predict their size. “The press release will underline that the decisions will depend on the flow of data and will be taken meeting by meeting – it is underlined – The speed of the following steps will be determined by the indications on the transmission of the monetary policy impulse to the real economy, inflation data, information on wage dynamics and the labor market, but also the updating of stability programs that member states will publish in April“.