London - The European Central Bank (ECB) is expected to leave interest rates
unchanged when it meets next week, according to the results of a Reuters poll of leading economic experts. Around 85 per cent of those surveyed expect the Bank to keep rates steady in the coming month but expect stalled economic growth to trigger a rise in June.
Of the 61 economists from across Europe polled by Reuters, 52 said they expect the Bank to leave the rate at 2.5 per cent when it meets on May 8. Only 7 said the bank would make a rate cut. Expectations have changed significantly since a similar Reuters survey in March, which found that 37 out of 53 economists (70 per cent) expected the bank to cut rates in May.
The Reuters poll highlights that despite recent statements from council
members of the ECB, many economists remain concerned about the longer-term
economic outlook for the Euro zone. Commenting ahead of the ECB meeting next
week, Martin Flak at Nordea in Copenhagen said, " They do not have a good track record of communicating with the market". He added, "It will not be improved if they surprise us. They will cut in June. Growth is weak, downside risks to the economy will be more obvious then and price pressures will be receding."
Earlier this week, ECB leaders commented that the end of the Iraq war had
removed a major source of uncertainty and that growth should recover later this year. The economists surveyed said the bank would be closely watching post-war business and consumer confidence surveys in May, and almost 90 per cent expect this to lead to a rate cut in June. Such a move may bolster consumer confidence and encourage business to invest in new equipment and jobs, they said.
Ruth Pitchford, Editor of Reuters Polling Unit, said: " A cut in rates next
week is not expected by the majority of economists we spoke to. However, they, like the ECB, will be closely watching for any signs of economic recovery post the Iraq war and expect a rate cut to be high on the agenda when the bank meets again in June".