Hike rates

The ECB “will raise its rates three times before the end of the year”

The European Central Bank (ECB) will raise interest rates three times this year, the consultancy firm Capital Economics has predicted.

The rate increases, of a quarter point or 25 basis points each, will take place in July, September and December, the consultancy said.

“For now, we think raising rates to a neutral level will probably be enough,” Capital Economics said in a client briefing.

Capital saving said the rate increases will mean the ECB deposit rate will drop from -0.5% to 0.25% by the end of the year. He predicts that rates will rise another 1.25%, or 125 basis points, in 2023.

“This is because much of the strength of inflation is due to global forces that are beyond the control of the ECB and are likely to prove transitory; higher energy prices will stifle demand internal, doing some of the ECB’s work for it; and although the second-round effects on wages are increasing, they should still be quite limited,” he said.

The assessment comes as ECB President Christine Lagarde, speaking at the Davos meeting in Switzerland, said officials would not rush to withdraw the stimulus as others echoed her to insist that there is no consensus for a half-point interest rate hike.

Irish mortgage brokers say a full 1% hike in ECB rates would add €3,000 to the cost of a €300,000 home loan over a full year.