The European Central Bank (ECB) will raise interest rates again in July as it battles to push inflation below its 2 percent ceiling, a survey of economists shows, Bloomberg reported.
Policy makers will follow yesterday's increase with 25 basis-point steps every three months, taking the benchmark rate to 1.5 percent in July and 1.75 percent in October, according to the median of 20 estimates in the Bloomberg News survey. The pattern will continue in 2012 with increases every quarter, so that the key rate reaches 2.75 percent before the end of next year, the survey shows.
ECB President Jean-Claude Trichet said yesterday that officials had not decided on a series of increases after lifting the benchmark from a record low of 1 percent, where it had been since May 2009. With inflation running at 2.6 percent and Germany's economy booming, economists said the ECB has embarked on a gradual policy-tightening cycle.
"Trichet may have said that they haven't made that decision, but he always says that," said Nick Kounis, chief European economist at ABN Amro Bank NV in Amsterdam, who expects the next move in July. "They will continue to raise rates and it's just a combination of factors that will drive it -- the inflation outlook, the economic outlook and their desire to normalize policy."
'Cautious Start'
Silvio Peruzzo, euro-area economist at Royal Bank of Scotland Group Plc in London, said the ECB's next move could come as soon as June.
"The phrase about the first step not being the beginning of a series is reminiscent of the start of the previous tightening cycle," he said. "Trichet wants to signal a cautious start."