Question 3: Under its current policy trajectory, with rates peaking at 3.5%, which of the following is most likely?
Answer:
ECB policy interest rates will be too high in 2023.
Confidence level:
Not confident
Question 2: Relative to market forecasts of the ECB’s MRO rate peaking at 3.5%, which of the following is more likely during 2023?
Answer:
The MRO rate will peak below 3.5%
Confidence level:
Not confident
Comment:
While the euro area economy has been surprisingly unaffected by tighter monetary policy, the ECB started raising interest rates only in July. There is thus plenty of tightening in the pipeline. I would not be surprised if the euro area economy were to slow markedly, forcing the ECB to reconsider the outlook for interest rates.
Question 1: How likely is it that peak headline euro area inflation is behind us?
Answer:
Very likely
Confidence level:
Confident
Comment:
For headline inflation to rise further, a large additional shock is required. While that can always happen, it seems unlikely.
Question 2: Should the ECB respond to movements in the euro-dollar exchange rate of the nature observed in 2022?
Answer:
No
Confidence level:
Confident
Comment:
The ECB should focus on ensuring price stability even if that results in large changes in the exchange rate of the euro to other currencies.
Question 1: What was the main cause for the euro’s decline relative to the US dollar in 2022?
Answer:
Monetary policy differences
Confidence level:
Confident
Comment:
With the economies in the US and the euro area impacted to different degrees by the Russian invasion of Ukraine, monetary policy divergences and exchange rate changes were inevitable.
The CFM surveys informs the public about the views held by prominent economists based in Europe on important macroeconomic and public policy questions. Some surveys focus specifically on the UK economy (as the CFM is a UK research centre), but surveys can in principle focus on any macroeconomic question for any region. The surveys shed light on the extent to which there is agreement or disagreement among these experts. An important motivation for the survey is to give a more comprehensive overview of the beliefs held by economists and in particular to include the views of those economists whose opinions are not frequently heard in public debates.
Questions mainly focus on macroeconomic and public policy topics. Although there are some questions that focus specifically on the UK economy, the setup of the survey is much broader and considers questions related to other countries/regions and also considers questions not tied to a specific economy.
The surveys are done in collaboration with the Centre for Economic Policy Research (CEPR).
Prospects for Euro Area Inflation in 2023
Question 3: Under its current policy trajectory, with rates peaking at 3.5%, which of the following is most likely?
Question 2: Relative to market forecasts of the ECB’s MRO rate peaking at 3.5%, which of the following is more likely during 2023?
Question 1: How likely is it that peak headline euro area inflation is behind us?
Euro weakness in 2022
Question 2: Should the ECB respond to movements in the euro-dollar exchange rate of the nature observed in 2022?
Question 1: What was the main cause for the euro’s decline relative to the US dollar in 2022?
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