As expected, the European Central Bank (ECB) has decided this thursday raise rates of interest in others 0.25 points percentages, with which the main rate is located at 3.75% (maximum from October 2008dawn of the previous crisis), while the deposit facility -the interest with which the money kept by the banks is remunerated, the most relevant in the current context- rises at 3.25%. “Inflation prospects are still too high and have been for too long,” she justified. The monetary authority of the euro zone, thus, has approved its seventh consecutive rate hike since last July it undertook the first in 11 years, although it is the softer of the last ten months (the previous ones were 0.5 or 0.75 points).
Your president, christine lagardehe already admitted a few weeks ago that he was left “a little way to go” in rate hikes. The message confirmed the more than foreseeable new increase in the price of money at the meeting this Thursday, although it left left more open What will the ECB do from now on? The senior French official, in fact, had been stronger in Marchby assuring that there was “much more ground to cover” in rate hikes. This was stated after raising them by 0.5 points despite the banking storm unleashed in the United States, which reached Credit Suisse in Europe.
In Thursday’s statement, has not given clues relevant to their future steps. But it has announced a new measure to tighten monetary policy. Thus, the reinvestments of the purchase program public and private debt that launched before the pandemic, which were going down at a rate of 15,000 million euros a month from June, they will run out next July. The fact that the ECB does not continue to buy back the maturing debt makes the financing of its issuers more expensive: public administrations and companies.
Credit pending
The key to their future steps is precisely to what extent the credit is tightening as a result of rate hikes and the financial storm from a few weeks ago. a financing scarcer and more expensive as a consequence of bank stress, it makes it less necessary to raise rates to achieve the same effect on the economy. And in recent weeks the struggle between the two souls that coexist within the ECB: that of those who defend a flexible and broad interpretation of its mandate that takes more account of the economic situation (‘doves’) compared to those who advocate sticking to their goal of achieving price stability (‘hawks’).
In this context, the analysts expected a new rise of 0.25 this month of May and perhaps a later one, which could raise the official price to a peak of 4%, where it would remain stabilized before starting to cut at the end of this year or the beginning of next, according to They coincide in pointing out a good part of the forecasts. The US Federal Reserve It raised its rates by 0.25 this Wednesday (up to a range between 5% and 5.25%) and has left the door open for a pause in rate escalation.
inflation and growth
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The truth is that the main mandate of the ECB is to achieve that the CPI of the euro zone is located in the 2% in the medium term and current inflation is far from that target. Although it has been giving in until the 7% in April (month in which it recorded a slight rise of one tenth), the call Underlying inflation -which excludes the more volatile prices of energy and unprocessed food- remains very high, in 5.6% (in April it cut a tenth).
In March, the central bank slightly revised downwards its price forecasts for this year (from 6.3% to 5.3%, in the average inflation rate) but has raised the forecast for the core rate (excluding energy and food) from 4.2% to 4.6%. In addition, it estimates that both headline inflation (2.9% in 2024 and 2.1% in 2025) and core inflation (2.5% and 2.2%) will continue to be above their target (2% in the medium term). at the end of its projection horizon, which pushes it to continue making money more expensive to further cool activity. As for the economy, he expects more growth this year than he predicted in December (1% instead of 0.5%), but less in 2024 and 2025 (1.6% in both years, compared to 1.9% and 1.8% previous).