No change, but no clue either. As expected, European Central Bank (ECB) I decided this Thursday Castle the children While the interest rate of the Eurozone is taken as a reference, its president Christine Lagarde said: great prospects The market will start next year less than The price of money, contrary to what the US Federal Reserve did on Wednesday. “Should we let our guard down? We asked ourselves that question. No, We must not let our guard down. senior French official says the monetary authority’s governing council “It was neither discussed nor discussed.” a future interest rate cut.
So the price of the currency remained unchanged for the second consecutive meeting, after the ECB increased the rate at a pace and scale unprecedented since its establishment in 1999 to combat high inflation: 4.5 points percentages 10 meetings They followed each other between July 2022 and September this year. HE main type so it will continue at 4.5% (highest level since May 2001) deposit facility (interest paid on money held in banks, more relevant in the current context) will remain at historical maximum 4%.
Therefore, the key in the current situation of monetary policy is expectations. latest data zone inflation became euro top more than expected (overall price 2.4% and basic price 3.6% in November; excluding the most volatile prices of energy and food) economy gives signs of growth weakness (GDP contracted by 0.1% in the third quarter). This situation caused investors to wait several descents rates next year, in some cases as early as March or April, and as late as 1.5 points Percentages through 2024. But senior officials at the ECB have been trying to do this for several weeks. dissuade them so they don’t take them lightly.
Inflationary pressures
That is why the monetary authority argued this Thursday: “Although inflation has fallen in recent months, There is a possibility of recovery statistical effects of the annual comparison and the withdrawal of fiscal support measures from Governments, as well as the CPI It will fall “slower” in 2024 more than in the current exercise. In addition, core inflation continues its moderate course, but inflationary pressures internal ones continue to be busy“The main reason for this is the strong growth in unit labor costs.”
The bank currently estimates: CPI The average will be 5.4 percent this year, 2.7 percent next year, 2.1 percent in 2025 and 1.9 percent in 2026. underlying This year it will drop from 5% to 2.7%, 2.3% and 2.1% respectively. is something less More than expected in September, but still implies: 2% target will not be available for some time 2025. when it comes GDPWhile it expects growth of 0.6% this year and 0.8% next year, below what it calculated in September (0.7% and 1%), it forecasts 1.5% for the next two years.
additional hardening
In addition to refraining from commenting on possible interest rate cuts, the ECB secondary hardening Monetary policy was not expected to last until the first quarter of 2024. The governing council therefore decided that from: July will start next year Stop reinvesting in bonds Average rate of debt purchased during the pandemic 7.5 billion A monthly support of Euros will be provided for this program to end at the end of next year. This will reduce your balance and will harden In addition, financial conditionsBy reducing the demand for these products.
At the same time, Lagarde underlined the following fact: first period Next year the ECB will have much more information on this issue. Salary increase agreement was reached in the agreements and to what extent the increases in question were profit margins of companies. He emphasized that this is the main issue that will determine the evolution of inflation in the coming months, as the CPI is now much more affected by domestic factors than international energy and food prices. ” domestic inflationa has not fallen much and we need to know why resists coming down“Lagarde warned.
However, the ECB President wanted to emphasize that: coincidence The fact that the information in question was available during the first period and the reinvestment of the debt began to be stopped at the end of the same period does not mean that this situation was valid in that period. lower rates. He used a game about English words for this purpose. “We are not dependent on history, we are dependent on data (We trust data, not dates),” he said, noting that “to go from the solid state (read, increasing rates) to the gaseous state (decreasing), you must first go through the liquid state (maintain them).”