Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Euro zone inflation to remain above ECB's target next year - Reuters poll

EconomyNov 11, 2021 07:17PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. The headquarter of the European Central Bank (ECB) is seen during sunset ahead of the ECB?s governing council meeting later this week in Frankfurt, Germany, October 25, 2021. REUTERS/Kai Pfaffenbach

By Shrutee Sarkar

BENGALURU (Reuters) - Euro zone inflation expectations are at risk of continuing to overshoot the European Central Bank's 2% target next year, according to a Reuters poll of economists who raised their outlook for consumer prices for a fifth consecutive month.

While inflation rose above 4% last month, more than twice the ECB's target, the Bank - unlike most other central banks - has pushed back on calls for tighter policy, calling the rise in inflation transitory and arguing it would subside next year.

But pandemic-led supply chain disruptions and rising oil prices challenge those views. Surging house prices are putting further pressure on the ECB, which has undershot its inflation target for nearly a decade, to act.

"The inflation story is getting more difficult to navigate for the ECB," said Peter Vanden Houte, chief economist at ING.

"Even though we don't believe oil and natural gas prices will continue to increase at the same pace in 2022 - we are actually forecasting a decline - the upward inflation impact might last a bit longer. The same holds true for goods price inflation, which has been pushed upwards by high commodity prices and shortages."

Euro zone inflation was forecast to average 2.2% next year after rising to 2.4% this year versus 1.8% and 2.3% predicted in October. Those forecasts are higher than the ECB's projections of 2.2% and 1.7%, respectively.

On a quarterly basis, inflation was predicted to average 4.1% and 3.1% this quarter and next. It was forecast at 3.5% and 2.5% in last month's poll. Inflation in October was 4.1%, matching the all-time high set in July 2008.

Although a higher base from this year led economists to expect a slower increase in prices in 2022, inflation was still expected to remain above the ECB's target.

The ECB is forecast to keep its key interest rates on hold through to end-2023 at least, with the deposit rate at -0.50% and its refinancing rate at zero.

A smaller sample of economists in the Nov. 8-11 poll willing to look beyond end-2023 showed a deposit rate hike to -0.25% the following year.

But a like-for-like analysis showed fewer analysts now expect a hike in 2024 compared to the October poll. Only two forecast a rate hike next year.

"Despite the pushback from the ECB, markets continue to think the central bank is behind the curve, but we agree with the central bank's assessment and do not expect a rate hike next year," said Angel Talavera, head of Europe economics at Oxford Economics.

Euro zone GDP will reach its pre-COVID-19 level this quarter, according to over 85% of respondents, 27 of 31, who answered an extra question. The bloc's growth outlook remained steady and largely unchanged from October.

The ECB's Asset Purchase Programme (APP), currently set at 20 billion euros per month, is set to rise to 40 billion after the Pandemic Emergency Purchase Programme ends on March 31. The highest forecast in the poll was 60 billion euros.

Nearly 70% of economists, 16 of 23, who responded to another question said the APP would finish by end-2023. The rest said it would end in 2024.

Thirteen of 22 respondents said if the ECB approves an APP increase, there would be an envelope covering a longer period. The others said it would be a set monthly volume.

"With other major central banks raising rates in 2022 – and thereby leading to potentially 'unwarranted' tighter conditions for the euro area too via spillover effects – we think the ECB will prefer to reserve capacity to buy more, if needed and flexibly over time in 2022," said George Buckley, chief UK and euro area economist at Nomura.

(For other stories from the Reuters global long-term economic outlook polls package)

Euro zone inflation to remain above ECB's target next year - Reuters poll

Related Articles

Euro zone economic sentiment eases in Jan
Euro zone economic sentiment eases in Jan By Reuters - Jan 28, 2022

BRUSSELS (Reuters) - Euro zone economic sentiment deteriorated in January, data showed on Friday, pulled down by a more downbeat sentiment in the two key sectors of industry and...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email