“Eurozone inflation is set to burn hotter throughout 2022 than expected a month ago, which could pressure the European Central Bank to tighten policy once the Omicron wave of the pandemic passes,” per the latest Reuters poll published during Wednesday’s Asian session.
Key quotes
For the near-term, the virus remains a wild card, with a wide range of forecasts on economic growth in the Jan 11-18 poll and the median forecast for the current quarter chopped to 0.5% from 0.7%.
More than two-thirds of economists polled said the Omicron variant will have a milder economic impact than Delta, mainly because there are fewer restrictions in place now.
Forecasts for inflation this year have risen for the seventh consecutive survey — up by 0.6 percentage points each for the first and second quarters to 4.1% and 3.7% respectively, well above the ECB's 2.0% target.
So far, the poll results back that view, with inflation set to dip to 1.9%, just below its target, in the fourth quarter and averaging below 2.0% from then on.
So nearly every economist expected policy interest rates to hold steady well into next year.
Asked when the ECB will end its Asset Purchase Programe, about 85% of respondents, 28 of 33, said by the end of the first half of 2023. The Fed is already hinting it will soon start offloading its holdings of bonds.
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