* reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=EUGDPQAP 2018 GDP growth poll data* reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=EUCPIAP 2018 inflation poll data* reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/cb-polls?RIC=EUECBR%3DECI ECB refinancing rate poll dataBy Rahul KarunakarBENGALURU, MARCH 2 (Reuters) - Euro zone economic momentumhas peaked, according to a majority of economists in a Reuterspoll who also said the European Central Bank will drop itseasing bias on stimulus by or at the June meeting.The region's economic performance has been robust and in2017, gross domestic product rose 2.5 percent, the fastestgrowth rate since a 3.0 percent rise in 2007.But the latest poll of 80 economists taken Feb. 26-28 showedthe economy is expected to lose some of that momentum on theeuro's strength and inflation was expected to remain well belowthe central bank's target over the next two years at least.More than 70 percent of 51 economists who answered aseparate question said the peak of growth momentum in the eurozone was now in the rear-view mirror."We expect annual GDP growth to edge down slightly this yearfrom Q4's very strong pace. The (PMI) surveys support thisview," noted Jennifer McKeown, chief European economist atCapital Economics.
While euro zone business growth was the fastest in well overa decade at the start of the year, it lost some steam last monthas a stronger currency took its toll, a private-sector survey ofpurchasing managers showed. Still, over 70 percent of respondents in the latest pollsaid they were not concerned the economic boom would be over bythe time the ECB starts to consider raising interest rates."We think that growth will be slower by the time the ECBraises rates. We do, however, think that the euro area willstill be expanding at a solid pace," noted Andrew Harris,economist at Fathom.Full-year GDP growth was expected to average 2.3 percentthis year and 2.0 percent next, compared to 2.3 percent and 1.9percent respectively in the previous poll. Quarterly growth isset to slow from 0.6 percent to 0.4 percent in Q2 2019.
BELOW TARGETWhile growth is well into its fifth year and is now showingsome signs of slowing, official flash data on Wednesday showedheadline inflation also slipped to a 14-month low in February. ECB President Mario Draghi said on Monday the factorsholding back inflation were temporary and prices will eventuallyrise.But inflation was forecast to average 1.5 percent this yearand 1.6 percent next, well below the target of just under 2percent. The consensus was for it to range between 1.3 and 1.6percent in each quarter through to the end of next year."The latest data suggests that the ECB's own assessment andconfidence that inflation will substantially pick up remainsmore wish than reality," said Bert Colijn, senior euro zoneeconomist at ING.To get inflation back to its target, the central bank hasbought over 2 trillion euros worth of mostly government bondssince 2015.Now, the ECB is widely expected to shut the stimulusprogramme this year and that has pushed the euro up over 1.5percent so far in 2018, coming after the single currencyregistered its best run since 2003 last year.While no major change is expected when ECB policymakers meeton March 8, almost a third of 56 economists who answered aseparate question said the central bank will drop its easingbias on asset purchases at that meeting.Including those respondents, over 70 percent of theeconomists expect that announcement to come at or before theJune meeting. The remaining third expect it to happen sometimeby early next year.Still, nearly 90 percent of over 50 economists said theywere confident the ECB will leave interest rates on hold formany months after it shuts its quantitative easing programme asit is currently suggesting.The central bank is expected to raise the deposit rate by 15basis points to -0.25 percent in the second quarter next yearand take it zero by end-2019. It is forecast to raise therefinancing rate once next year, in the third quarter, by 25basis points to 0.25 percent."Any deviation from the 'well past the horizon of our netasset purchases' statement would damage the ECB's reputation.Moreover, against the backdrop of a strengthening euro the ECBwill not be in a hurry to hike rates," noted Martin Wolburg,senior economist at Generali Investments.(For other stories from the Reuters global long-termeconomic outlook polls package: ) (Polling and analysis by Manjul Paul and Indradip Ghosh;Editing by Janet Lawrence)
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