# ECB to go big again on Oct. 27 with 75 bps rate hike: Reuters poll
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-10-19
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: ECB to raise rates by 75 bps in October to combat soaring
Meta Description: European Central Bank set to raise deposit and refinancing rates in response to surging inflation, driven by energy costs and geopolitical tensions.
URL: https://financedigest.com/ecb-to-go-big-again-on-oct-27-with-75-bps-rate-hike-reuters-pollhtml

By Jonathan Cable

LONDON (Reuters) – The European Central Bank will go for another jumbo 75 basis point increase to its deposit and refinancing rates when it meets on Oct. 27 as it tries to contain inflation running at five times its target, a Reuters poll found.

As in much of the world, [euro zone inflation](https://www.financedigest.com/euro-zone-consumers-more-optimistic-on-inflation-ecb-survey-shows.html "Euro zone consumers more optimistic on inflation, ECB survey shows") has soared on skyrocketing energy prices and supply chains still healing from the coronavirus pandemic have taken a further hit from Russia’s invasion of Ukraine.

The ECB [targets inflation](https://www.financedigest.com/the-mouse-that-roared-new-zealand-and-the-worlds-2-inflation-target.html "The mouse that roared: New Zealand and the world’s 2% inflation target") at 2.0%, yet it was 10.0% last month. It will average at a [peak of 9.6% this quarter](https://www.financedigest.com/iveco-supply-issues-to-peak-this-quarter-after-weighing-down-q1.html "Iveco supply issues to peak this quarter after weighing down Q1"), higher than thought last month, before gradually drifting down but will not reach target until late 2024, the poll found.

“Inflation is far too high. Rapid [rate rises](https://www.financedigest.com/uk-inflation-rate-unexpectedly-rises-to-10-4-in-february.html "UK inflation rate unexpectedly rises to 10.4% in February") are needed. However, the [ECB also needs to keep an eye on bond](https://www.financedigest.com/ecb-can-cut-carbon-footprint-by-shedding-bonds-of-biggest-polluters.html "ECB can cut carbon footprint by shedding bonds of biggest polluters") spreads, so more than 75bps seems unlikely,” said Brian Martin at ANZ.

Much of the price [pressure is coming from energy costs](https://www.financedigest.com/factbox-global-banks-take-axe-to-jobs-as-cost-pressures-mount.html "Factbox-Global banks take axe to jobs as cost pressures mount"). With no end in sight to the Russia-Ukraine conflict, nearly 65% of 34 respondents said the cost of living in the [euro zone](https://www.financedigest.com/euro-zone-inflation-seen-just-above-ecbs-target-in-2025-poll-shows.html "Euro zone inflation seen just above ECB’s target in 2025, poll shows") would worsen or worsen significantly. Only 12 said it would improve.

The worst impact of the [energy crisis](https://www.financedigest.com/europes-energy-crisis-and-the-nuclear-path-out.html "Europe’s energy crisis and the nuclear path out") on the household sector will develop in Q4 2022 and Q1 2023, when the demand for gas is seasonally higher,” said Luca Mezzomo at Intesa Sanpaolo. (Graphic: [Reuters Poll](https://www.financedigest.com/germany-home-prices-to-sink-nearly-6-this-year-reuters-poll.html "Germany home prices to sink nearly 6% this year – Reuters Poll") – Euro zone economic outlook, https://fingfx.thomsonreuters.com/gfx/polling/zjpqkxrzbpx/Reuters%20Poll%20-%20Euro%20zone%20economic%20outlook.PNG)

In the run-up to winter, forecasters are [expecting the ECB](https://www.financedigest.com/hawkish-ecb-comments-push-up-rate-hike-expectations.html "Hawkish ECB comments push up rate-hike expectations") to be more aggressive in tightening policy.

The bloc’s [central bank will take the deposit rate](https://www.financedigest.com/central-banks-keep-hiking-rates-amid-banking-turmoil.html "Central banks keep hiking rates amid banking turmoil") to 1.50% and the refinancing rate to 2.00% next Thursday, a view held by an overwhelming majority of respondents in the Oct. 12-18 [Reuters poll](https://www.financedigest.com/european-central-bank-to-raise-deposit-rate-to-3-25-by-mid-year-reuters-poll.html "European Central Bank to raise deposit rate to 3.25% by mid-year: Reuters poll") of more than 60 economists.

Three-quarters of respondents to an additional question, 27 of 36, said the [bank ought to choose a 75 basis point lift to the deposit rate](https://www.financedigest.com/instant-view-ecb-sticks-with-big-rate-hike-even-as-bank-fears-roil-markets.html "Instant View: ECB sticks with big rate hike even as bank fears roil markets") while two said it should go harder with a 100 basis point increase. Only seven recommended 50 basis points. (Graphic: Reuters Poll – [ECB monetary policy outlook](https://www.financedigest.com/stocks-euro-gain-amid-divergent-fed-ecb-rate-hike-outlooks.html "Stocks, euro gain amid divergent Fed, ECB rate hike outlooks"), https://fingfx.thomsonreuters.com/gfx/polling/dwvkroxbbpm/Reuters%20Poll%20-%20ECB%20monetary%20policy%20outlook.PNG)

SHORT AND SHALLOW?

The ECB’s first increase did not come until July, when it added 50 basis points to all its rates – taking the deposit rate to zero, its first [time not in negative territory since](https://www.financedigest.com/soccer-arsenal-reach-womens-champions-league-semis-for-first-time-since-2013.html "Soccer-Arsenal reach Women’s Champions League semis for first time since 2013") 2014 – and followed that up with a 75 basis point lift in September.

That was slow compared to peers like the United States Federal Reserve, which has contributed to a [fall in the euro](https://www.financedigest.com/big-fall-in-euro-zone-inflation-offers-little-help-for-ecb.html "Big fall in euro zone inflation offers little help for ECB") to below parity to the U.S. dollar.

By year-end the deposit and refinancing [rates were forecast](https://www.financedigest.com/dollar-falls-after-fed-raises-rates-forecasts-future-hike.html "Dollar falls after Fed raises rates, forecasts future hike") to be at 2.00% and 2.50% respectively compared to 1.25% and 2.00% predicted in a September poll.

The deposit rate was expected to reach a [peak](https://www.financedigest.com/bank-of-england-set-to-hike-to-4-as-rate-peak-looms.html "Bank of England set to hike to 4% as rate peak looms") of 2.50% next year and the refinancing rate 3.00%, higher than the 1.50% and 2.00% highs given in September. The highest [forecast was for them to reach](https://www.financedigest.com/automotive-body-in-white-sales-at-3-4-cagr-over-the-forecast-period-from-2021-to-2031-reaching-us-59-7-billion-in-2021.html "Automotive Body in White sales at 3.4% CAGR over the forecast period from 2021 to 2031, reaching US$ 59.7 billion in 2021") 4.00% and 4.50%.

The [ECB has promised more hikes](https://www.financedigest.com/big-ecb-hike-adds-fuel-to-the-banking-sector-fire.html "Big ECB hike adds fuel to the banking sector fire") and begun a debate about unwinding its 3.3 trillion euros ($3.25 trillion) of bond purchases – the legacy of its fight against deflation in the last decade.

Two hawks on the [ECB’s Governing Council called last week for more hikes](https://www.financedigest.com/analysis-investors-stick-to-bets-on-early-end-to-ecb-hikes-as-uncertainty-grows.html "Analysis-Investors stick to bets on early end to ECB hikes as uncertainty grows") to fight runaway price rises. But the [central bank](https://www.financedigest.com/central-banks-hike-rates-again-but-a-pause-is-coming.html "Central banks hike rates again, but a pause is coming") is also facing a recession in the bloc and economists in the poll gave a median chance of 70% of one within a year.

Asked what type of recession it would be, 22 of 46 respondents said it would be short and shallow while 15 said it would be long and shallow. Eight said it would be short and deep and only one said it would be long and deep.

The economy was [expected to grow 3.0% this year but flatline in 2023 before returning](https://www.financedigest.com/lufthansa-expects-further-significant-improvement-after-return-to-profit.html "Lufthansa expects further ‘significant improvement’ after return to profit") to growth in 2024 and expanding 1.5%. In September’s poll those forecasts were 2.9%, 0.4% and 1.6%.

(For other stories from the [Reuters global economic poll:)](https://www.financedigest.com/global-2023-economic-view-downgraded-at-odds-with-market-optimism-reuters-poll.html "Global 2023 economic view downgraded, at odds with market optimism: Reuters poll")

($1 = 1.0144 euros)

(Reporting by Jonathan Cable; polling by Susobhan Sarkar, Prerana Bhat and Sarupya Ganguly; Editing by Alison Williams)


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