ECB 'to hike rates on three occasions before end of year'

President of European Central Bank, Christine Lagarde.

The European Central Bank (ECB) will hike interest rates on three occasions this year, leading consultancy, Capital Economics has predicted. 

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

"For now, we think that raising rates to a neutral level will probably be sufficient,"  Capital Economics said in a briefing to clients. 

Capital Economics said the rate increases will mean the ECB's deposit rate will increase from -0.5% to 0.25% by the end of the year. It predicts rates will rise by a further 1.25%, or 125 basis points, in 2023.

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

The assessment comes as ECB President Christine Lagarde speaking at the Davos gathering in Switzerland said officials won’t rush into withdrawing stimulus as others  echoed her to insist there’s no consensus for a half-point interest-rate hike. 

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