# European Central Bank to raise deposit rate to 3.25% by mid-year: Reuters poll Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-01-23 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: ECB to Raise Deposit Rate Again in Fighting Inflation Meta Description: Find out how the European Central Bank plans to combat inflation with a 50 basis point increase in deposit rates, as revealed by a recent Reuters survey. URL: https://financedigest.com/european-central-bank-to-raise-deposit-rate-to-3-25-by-mid-year-reuters-pollhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-01-23t020934z1lynxmpej0m018rtroptp4eurozone-economy-poll-1736814558309-compressed.jpg) By Jonathan Cable LONDON (Reuters) – The European Central Bank will be more aggressive than previously thought in its tightening campaign, adding another 50 basis points to its deposit rate on Feb. 2, as it continues its battle against rampant inflation, a Reuters poll found. Although the [euro zone’s central bank](https://www.financedigest.com/dollar-outshines-euro-sterling-amid-european-bank-jitters.html "Dollar outshines euro, sterling amid European bank jitters") has been raising rates at its fastest pace on record it has so far failed to bring inflation anywhere near its 2% target. [Prices rose 9.2% in December on a year](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") earlier, official data showed last week. ECB President Christine Lagarde and her Governing Council will take the [deposit rate](https://www.financedigest.com/credit-suisse-offers-higher-deposit-rates-in-asia-to-woo-the-wealthy-sources.html "Credit Suisse offers higher deposit rates in Asia to woo the wealthy – sources") to 2.50% on Feb. 2, said 55 of 59 economists in the Jan. 13-20 poll. They are likely to follow that up with another 50 basis point lift in March. The [central bank](https://www.financedigest.com/inflation-trumps-financial-risks-as-central-bank-tightening-set-to-continue.html "Inflation trumps financial risks as central bank tightening set to continue") will then add 25 basis points next quarter before pausing, giving a terminal rate in the current cycle of 3.25%, its highest since late 2008. In December’s poll, the [rate was put at 2.50% at end-March and was seen](https://www.financedigest.com/dollar-bounces-as-fed-seen-keeping-up-aggressive-rate-hikes.html "Dollar bounces as Fed seen keeping up aggressive rate hikes") topping out at 2.75%. (Graphic: Reuters Poll – ECB deposit [rate outlook](https://www.financedigest.com/yen-sinks-as-rates-outlook-diverges-nz-dollar-tumbles.html "Yen sinks as rates outlook diverges; NZ dollar tumbles"), https://fingfx.thomsonreuters.com/gfx/polling/movakjzjyva/Reuters%20Poll%20-%20ECB%20deposit%20rate%20outlook.png) Asked how the risks were skewed to their terminal deposit [rate forecasts](https://www.financedigest.com/dollar-falls-after-fed-raises-rates-forecasts-future-hike.html "Dollar falls after Fed raises rates, forecasts future hike"), over two-thirds of respondents, 23 of 33, said it was more likely it ends higher rather than lower than they currently expect. “The risk is they will actually be as aggressive as they have claimed. Lagarde and others have said they are in for the long haul where we are going to [raise rates](https://www.financedigest.com/bank-of-england-raises-rates-to-3-5-says-inflation-has-peaked.html "Bank of England raises rates to 3.5%, says inflation has peaked") meeting by meeting in 2023,” said Silke Tober at the Macroeconomic Policy Institute (IMK). “It’s a very clear risk but I happen to think it would be a mistake.” The refinancing [rate was expected to rise](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") 50 basis points to 3.00% next week and reach a peak of 3.50% in March. The U.S. Federal Reserve, which began raising rates many months before the ECB, is forecast to [end its tightening cycle](https://www.financedigest.com/european-shares-rise-as-us-inflation-data-signals-end-of-rate-hike-cycle.html "European shares rise as US inflation data signals end of rate-hike cycle") after a 25 basis point hike at each of its next two policy meetings. It is then expected to hold rates steady for at least the rest of the year, [according to a recent Reuters poll](https://www.financedigest.com/investment-in-mental-health-amongst-cybersecurity-professionals-set-to-increase-according-to-infosecurity-europe-poll.html "Investment in mental health amongst cybersecurity professionals set to increase according to Infosecurity Europe poll"). GROWTH UPGRADE Inflation has already peaked in the 20-nation EU, the poll found, and will drift down, but was not [seen at the ECB’s target](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") until at least 2025. [Inflation will average 6.0% this year](https://www.financedigest.com/spains-inflation-to-be-lower-this-year-than-in-2022-minister.html "Spain’s inflation to be lower this year than in 2022 -minister") and 2.5% next but will be 2.0% across 2025. A mild winter so far, [falling gas prices](https://www.financedigest.com/buy-off-plan-to-beat-stalling-house-prices-and-falling-rental-yields-says-jean-liggett.html "“Buy off-plan to beat stalling house prices and falling rental yields” says Jean Liggett ") and recent positive economic data meant some quarterly growth forecasts were upgraded in the latest poll from a December survey. Although a technical recession was still predicted – with a 0.2% [contraction last quarter](https://www.financedigest.com/german-gdp-contracted-by-0-4-in-the-fourth-quarter.html "German GDP contracted by 0.4% in the fourth quarter") and 0.3% in the current one – the economy was now expected to grow 0.1% next quarter rather than flatline. It is [forecast to expand](https://www.financedigest.com/microfluidic-devices-market-is-anticipated-to-expand-at-a-healthy-cagr-of-24-during-the-forecast-period-2021-to-2031.html "Microfluidic Devices Market Is Anticipated To Expand At A Healthy CAGR Of 24% During The Forecast Period 2021 to 2031") 0.3% in the following two quarters, unchanged medians showed. All but one of the 36 economists who responded to another question said the bloc’s downturn was more likely to be shallower than they expect rather than deeper. Not only has the risk of severe, energy-driven recessions diminished markedly but the direction of travel of leading indicators, including our PMI data, signals a rising likelihood of an [earlier pick-up in growth than expected,”](https://www.financedigest.com/portuguese-airline-tap-swings-to-profit-earlier-than-expected.html "Portuguese airline TAP swings to profit earlier than expected") said Ken Wattret at S&P Global. Across this [year growth](https://www.financedigest.com/the-non-invasive-prenatal-testing-nipt-market-is-estimated-to-witness-stupendous-growth-in-the-years-to-come.html "The Non Invasive Prenatal Testing Nipt Market is estimated to witness stupendous growth in the years to come") was pegged at 0.1%, a turnaround from the 0.1% contraction forecast last month. In 2024 it was [expected to grow](https://www.financedigest.com/german-economy-expected-to-grow-modestly-in-2023-european-commission.html "German economy expected to grow modestly in 2023 – European Commission") 1.3%, unchanged from December’s prediction. (For other stories from the Reuters global [long-term economic](https://www.financedigest.com/uae-plans-long-term-economic-ties-with-israel-despite-political-strains.html "UAE plans long-term economic ties with Israel despite political strains") outlook polls package:) (Reporting by Jonathan Cable; polling by Aditi Verma, Sujith Pai and Sarupya Ganguly; editing by Jonathan Oatis) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---