Part or the forecast revision for the interest rates is due to their subdued inflation and growth outlook. All experts have revised their growth outlooks for Germany and the Euro Area downwards. So were Inflation forecasts for Germany revised downwards by 12 experts and inflation outlooks for the Euro Area were revised downwards by 8 experts. The other part of the interest rate forecast revisions were due to revisions about the future part of monetary policy interest rates, which also reflect a subdued inflation and growth outlook. While no experts expect the ECB to change its monetary policy, 12 experts have revised their forecasts for the federal funds rate downwards.
Although the experts still expect the yield curve to become steeper, they expect long-term interest rates to increase less compared to the last survey. The lower interest rate forecasts are consistent with the experts’ lower inflation and growth expectations. The experts expect 1.4 percent inflation in the Eurozone and a growth rate of real gross domestic product of 1.1 percent for 2019, which indicates a slowdown of economic growth and a failure of the European Central Bank (ECB) to meet its inflation target. Given that, the experts lowered their outlook for the long-term interest rate to 0.15 percent. For the short rate, the experts predict a slight downward change, since they expect the ECB’s main refinancing rate to stay at 0.0 percent at least until the end of the third quarter of 2019. But the experts expect the yield of US Treasury bonds to increase from 2.39 percent to 2.70 percent by the end of the third quarter of 2019. Given the still accommodative monetary policy stance of the ECB in 2019, the experts forecast an appreciation of the Euro from 1.122 US-Dollar to 1.140 US-Dollar in the second quarter and to 1.153 US-Dollar in the third quarter of 2019.
Although some the experts revised their stock market forecasts downwards, they expect the DAX and the Stoxx index to recover by the end of the third quarter of 2019. On average, the experts predict the Stoxx index to increase from 3.101 points at the end of the first quarter of 2019 to 3.178 points at the end of the second quarter of 2019 and to 3.214 points at the end of the third quarter of 2019. This would correspond to increases of 2.5 percent and 3.6 percent since March 2019. Moreover, the experts expect the DAX to increase from 11.428 to 11.729 in the second quarter of 2019 and to 11.814 by the third quarter of 2019, which corresponds to increases by 2.6 and 3.5 percent since end of March 2019. Interesting is that the experts expect the Stoxx and the DAX to grow faster than the S&P 500, which we surveyed for the second time. For the S&P 500 the experts only expect increases by 1.5 and 2.5 percent.
In the long-term ranking, which covers the last 16 quarters, National-Bank could defend rank one, while Commerzbank and Nord/LB could defend rank two and rank three.