JPMorgan Pushes Back Forecast for ECB Rate Hike on Slower Growth

Piotr Skolimowski
JPMorgan Pushes Back Forecast for ECB Rate Hike on Slower Growth

(Bloomberg) -- The European Central Bank will only start raising interest rates at the end of this year as the euro-area economy faces slower growth and inflation, JPMorgan Chase & Co. predicts.

The economists pushed back their forecast for the first increase to December from September and lowered their “underlying” growth prediction for this year to 1.5 percent from 2 percent, according to a note on Thursday. They predict inflation will reach 1.1 percent at the end of this year, still short of the ECB’s goal of just under 2 percent.

JPMorgan is the latest bank to predict a delayed start of rate hikes with some economists expecting that the lift-off won’t begin until early 2020. President Mario Draghi said last month that risks to the euro-area economy were worsening as the central bank lowered its growth forecast.

The ECB has stopped expanding its 2.6 trillion euro ($3 trillion) asset-purchase program this year and expects to keep rates at current record lows through the summer. JPMorgan predicts the December hike of 15 basis points will be followed by two more increases in 2020, pushing the deposit rate to 0.25 percent from the current minus 0.4 percent.

“The main motivation for the ECB would be to ‘get moving,’ even though core inflation would be rising only gradually,” JPMorgan economists Greg Fuzesi, Raphael Brun-Aguerre and Marco Protopapa write in their note.

To contact the reporter on this story: Piotr Skolimowski in Frankfurt at pskolimowski@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Kevin Costelloe

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