HE European Central Bank (ECB) made a statement in mid-September, rate increases Official interest rates in the euro area reached the endAfter increasing these 4.5 points percentages in the cycle for July 2022 faster and sudden increases in history. wasn’t -and still not- loyaltyHowever, the events that have occurred since then have further increased this situation. expectation The Bank of Spain said rates would actually not rise further. “Today I can be even more confident current level if maintained for a period of time long enough will be enough“, assured Pablo Hernández de Cos, president of the Spanish central bank and advisor to the European Central Bank, this Wednesday.
Of course, this is a conditional prediction The economy, inflation and the transmission of tight monetary policy are expected to behave as the ECB expects in the coming quarters. “This is an assessment conditioned on currently available information. uncertainty is too high and this was not ignored new disorders whereat we would have to answer“, he warned during the public intervention held within the framework of its annual meeting International Monetary Fund Held these days (IMF) marrakech.
In any case, Hernández de Cos said that if one of these disturbances occurs, the ECB’s reaction will change. I shouldn’t be this strong as after invasion of ukraine via Russia last spring. Then he remembered, deposit facility (interest paid by the central bank on money held in banks is the most relevant in the current context) It was at -0.5% and the demand of economic units, reopening the economy Post Covid. He added that rates are now at the limit. restrictive for economy (4.5% for general interest and 4% for deposit facility) and the ECB’s balance sheet is shrinking, so a new disturbance may occur. “very different” results Regarding inflation expectations
future disruptions
The governor is considered one of them ECB advisors are more concerned about the impact of interest rate hikes on the economy (including ‘pigeons’ Compared to those who favor tighter monetary policy to combat inflation (in industry jargon)‘Hawks’). He carried out a balancing exercise in this direction. On the one hand, he reassured that this had to happen. “very careful” The future of interest rates was evaluated “early” talk about the future cuts (the market expects these in the second half of 2024) and the central bank’s “did not commit” not to burden them further.
But he also thought: The market commented “well” Messages initiated by the ECB after its September meeting with the expectation that interest rates will remain high for a longer time and at some point. go back down: “For me, that’s a sign that he believes that we will reach our goal “To reduce inflation to 2 percent,” he said. Likewise, he emphasized that inflation will also increase. real interest rates Market developments in recent weeks due to the increase in nominal values and the decrease in inflation increase the possibility that the central bank will not need to tighten monetary policy further.
Of course, Hernández de Cos warned that the ECB’s forecasts are based on the following hypothesis: fiscal policy of governments will be restrictive for growth next year. Otherwise, he warned, it could affect inflation. force the central bank take new measures. He added that the Bank of Spain therefore demanded the dismissal of Pedro Sánchez’s manager. remove measurements to mitigate the effects of the energy increase and if it decides to expand them or approve new ones, more directed to the groups most affected.