Analysts push back rate-hike bets as ECB extends lending
Published 08/03/2010 | 09:03
MAJOR investment houses have started to push back predictions for a first rise in European Central Bank interest rates after the ECB extended unlimited lending to banks for longer than expected.
Before last week’s meeting, when the ECB kept its rates at a record low of 1pc for the 10th month running, 60pc of economists polled by Reuters had expected the first rise in official rates by the end of this year.
But research notes show that investment houses now see the ECB waiting until 2011, after the bank said it would keep one-week lending on an unlimited basis until at least October – previously the bank had only worked in three-month periods.
“Embedded in these moves is a clear desire to regain control of its interest rate instrument,” Goldman Sachs said in a note to investors.
“We have, therefore, also pushed the first hike of the official interest rate, to 1.25pc, from the fourth quarter of 2010 to the first quarter of 2011.”
Commerzbank also said it now saw the first hike in the spring of next year, compared with its earlier expectation of two hikes late this year. Several analysts, who had not changed their rate forecast, said the risks of the first hike happening later had increased.