S&P still expects ECB interest rate hike in September

S&P still expects ECB interest rate hike in September

Credit ratings agency S&P still expects the ECB to raise interest rates for the first time in eight years next September, despite growing sentiment of late that no rate rise is likely until the very end of 2019 at the earliest.

The ECB has already said that interest rates are likely to remain at their current low levels at least through next summer and investor expectations of a first rate hike since 2011 happening no sooner than next October have been building for a number of months; ultimately meaning that Irish households wouldn’t see any effect until 2020.

S&P Global Ratings also painted a bleak picture for European companies in 2019, saying access to finance is likely to become tighter and operating conditions will become more testing.

“Although positive economic momentum is likely to sustain further increases in operating performance, markets are likely to demand higher premiums to compensate for the deterioration in conditions and intensifying risks.

“Ratings trends already point to a deterioration in credit quality, as companies wrestle with growing cost pressures, the impact of trade conflicts on confidence and supply chains, uncertainty around Brexit, signs of a slowdown in Chinese markets, and a battery of regulatory and technological changes,” it said in a 2019 outlook report.

Against the backdrop of rising US interest rates and Brexit — which, it said is likely to have an adverse initial economic impact on Ireland, Denmark and the Netherlands as well as the UK — S&P said merger and acquisition activity is also likely to remain subdued next year.

“While some industries do expect to see continued merger activity, the motivations are often as much to do with coping with cost pressures and weak growth as positive expansion.”

it said.

Meanwhile, recruitment firm Morgan McKinley has warned that Ireland is coming under increasing pressure to attract top overseas talent to fill high-end jobs. “While we are still attracting a lot of European talent into Ireland, we are now facing more competition than before from other European employers,” said Morgan McKinley Ireland’s Tracy Keevans.

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