The European policy rate will peak at 4 percent. That’s what analysts say in a survey by the Bloomberg news agency. With this they go back on an earlier forecast, in which the peak was set at 3.75 percent. They therefore assume that more interest rate increases will follow, and rightly so, says BNR’s house economist Han de Jong.
According to him, it could very well be that interest rates will indeed be raised further. De Jong thinks that the so-called ‘hawks’ within the European Central Bank (ECB) currently have the upper hand. “There will be at least one rate hike, and the difference between the two forecasts is another rate hike,” he says. ‘Of course it doesn’t make a world of difference, but it is still a different picture than before.’
‘Of course it doesn’t make a world of difference, but it is still a different picture than before’
According to De Jong, the reason for the pessimism of analysts lies in inflation – and in particular the lack of prospects for falling inflation. Even despite the expectation that inflation will fall in the coming months. ‘Really decent, even, but what you also see is that this is mainly due to energy prices,’ says De Jong. ‘But if you disregard those prices and food prices (core inflation, ed.), they have not fallen very sharply. It is also well above the ECB’s 2 percent target.’
To trust
And that will remain the case for the foreseeable future, analysts believe. As far as De Jong is concerned, they do not dare to rely on the provisional decrease. ‘We know, of course, that rate hikes affect the economy with a lag,’ says De Jong. And so does inflation. So if you keep raising interest rates until you get to 2 percent inflation, you’ve gone too far.’
According to De Jong, it is therefore a good question when interest rates will fall again. While many economists think that the ECB will lower interest rates again from the second quarter of 2024, De Jong is not so sure yet. “It is still a long way off, and it all depends on how inflation stands then,” he concludes.
Gas price
As an example, he cites the gas price, which rose enormously last year, but also fell enormously again. ‘I’ve heard stories that the price will rise again in the winter, if everything goes wrong’, concludes De Jong. “That will push inflation up, but if that also leads to an acceleration of wage growth and therefore an acceleration of core inflation, then I think that interest rate cuts in the second quarter of next year are not yet on the cards.”
