THE European Central Bank (ECB) is on course to raise its still-negative deposit rate in the third quarter of 2019 but economists’ conviction has faded over the past month as the chances of a recession have risen.

A Reuters poll conducted Dec. 4-7 also showed economists are unanimous in saying the risk is low that the Governing Council will extend its more than 2.6 trillion euro (US$2.96 trillion) asset purchase program beyond this month, which would break its long-held guidance.

The survey, taken during a period of extreme gyrations in global financial markets, also found it was a close call for economists on whether the ECB would hike its main refinancing rate in a year’s time, and it may be pushed into early 2020. The rate is currently zero.

A series of weak economic reports, including slowing momentum in key business surveys and a shock report showing eurozone growth halved to just 0.2 percent in the third quarter, which was the lowest in four years, is partly responsible for the hesitation.

But even if the economy does bounce back in the current quarter as most respondents still expect, there is not enough likely momentum or inflation pressure building to warrant several rate rises next year.

The survey is the latest in a series of Reuters polls on major world central banks, including the U.S. Federal Reserve, which show fading conviction for policy tightening.

“I would say we have strong doubts ... there is a genuine chance there will be no hikes at all next year. Within the next few years the only thing I see is a normalization of getting rid of negative interest rates,” said Peter Vanden Houte, chief eurozone economist at ING.

Nearly two-thirds of respondents who answered an extra question, 31 of 48, said their conviction around the ECB’s current expected rate hike path in 2019 has fallen over the past month.

Only three felt more confident, while the remaining 14 said there was no change.

“With actual growth rates set to lag potential growth from 2019 onwards, the ECB’s medium-term inflation target is unlikely to be attained on a sustainable basis,” wrote Juergen Michels, chief economist at BayernLB.

“Accordingly, the ECB is likely to distance itself more and more from its plan to raise its policy rates for the first time after summer 2019.”

The latest Reuters poll found the chances of a recession next year, while still low, crept up to 20 percent from 15 percent previously, where it had held since August. (SD-Agencies)