As of July 2022, when the European Central Bank – with the approval of its government – has been bankrupt for a decade and a half. The interest rate is zero In the search for a tool to curb the already rampant inflation, there was no peace between the monetary regulatory bodies of the single currency countries. Not a year has passed since the jump from 75 basis points With what Christine Lagarde Nearly two years of restrictive positions began when the Governor of the Bank of Portugal decided, Mario CentenoHe began to paint a scenario for interest rates to return to normal, with gradual cuts aimed at providing “predictability” to European financial markets. Far from this thesis, the hard line of the societal economy prevailed month after month, until the credit rate reached 4.5%, which is touching its highest historical levels. With inflation declining across the EU and increasingly evident in the form of lower mortgages and some slack in key EU markets, every meeting of eurozone governors is a battle: markets demand a credit rating downgrade to revitalize capital; While both Frankfurt and Germany's allies call for moderation, if not deeper restrictions. The decision is scheduled to be made on Thursday, the seventh of next month, when the Government Council will meet for the second time this year to decide the short-term meaning of the restrictions imposed on financial operations.
The two trenches within the European Central Bank's Governing Council –Falcons I the bathroomProponents of lowering inflation at all costs versus those calling for monetary flexibility enter the third month of 2024 with a host of contradictory statements. Centeno himself, the most vocal in his branch, had been promoting rate cuts for months already in March. For the Portuguese, the third month of the year is “the month in which we have more data in front of us”; These seem to support his claims. As Eurostat published last Friday, eurozone inflation fell during February to 2.6%, six-tenths of the long-term target of 2% set by the world's main monetary regulators. In the single currency countries as a whole, energy is depressing prices by 3.7%, while food prices are already growing at a near-stable rate of 2.2%. The core index, the one that does not contain the most volatile values – food and energy specifically – is already touching the 3% threshold, the lowest level since March 2022, and still at the beginning of the inflationary spiral.
Centeno already warned in the spring of 2023 of the possibility of what is known as an overshoot, a very intense rise in interest rates that ultimately damages the economy. He returned to it last January, during the Economic Forum in Davos, when he issued a veiled warning to Lagarde against “doing too much” to control inflation. A few hours ago, however, one of the historical representatives of Falcons In Frankfurt, Austria Robert Holzmanposition clarified Falcons Ahead of the first monetary policy meeting in January, which was scheduled to set the path to 2024. Holzmann had already warned at the beginning of the year, at the same forum, that “one should not bet on lower interest rates in 2024.” “. . At the end of February, with provisional inflation data for the first two months of the cycle, he already stressed that he “does not see conditions that allow” a reduction in the cost of credit; Referring to the decisions of the US Federal Reserve as a guide to the European regulator.
Most of the Bank's governors, as well as the Bank's management, seem to view the European economy through the same eyes as Holzmann. Bundesbank Governor Joachin Nagel has already confirmed that Frankfurt will have to wait “until the summer” to consider cutting funding conditions – a reading in line with the dovish trend at the Fed, which is already proposing June as a key date for lowering funding conditions. Loans in dollars are cheaper. For his part, the President of the Slovak Central Bank said Peter Casimir He confirms that the bank will move away from any “commitment to lowering interest rates” in the short term, despite the high expectations of the financial sector. From the structure of the entity itself, the path appears to be as follows: Vice President of the European Central Bank and former Spanish Minister of Economy, Luis de GuindosIn an interview last Thursday, he already removed any certainty about a rate cut, emphasizing that Frankfurt “moves by data, not by dates.” In fact, as reported by Reuters, the European Central Bank hopes to maintain the “minimum interest rate” for years, thus avoiding a return to the zero level that dominated the Union’s monetary policy for a decade and a half before the pandemic.
Mortgage problems
Amid the battle among central bankers to determine the European Union's monetary policy for the current year, the European Central Bank's credit policy continues to trickle down to the real economy. Although all credits are showing downward trends, it is mortgages that have been hit the hardest. During 2023, mortgage origination in the country fell by 19.2% compared to the previous year, a blow that is difficult to remember: with 65,470 mortgages in 12 months, Catalan consumers realized that the interest escalation was enough to turn away from bank financing. For real estate transactions. And this is no less: Euribor, the index that sets the pace of mortgages in the union, was above 4% for most of the last financial year, making good loan reviews considerably more expensive for the community's citizens. The downward trend in inflation held the index down for several months, which closed February at 3.6%, a figure far from the ceiling reached in the fall; And the Governor of the Bank of Spain himself, Pablo Hernandez de CosHe confirms that 2024 will be a year of “comfort” for mortgagees. However, the first days of March do not leave good news: the daily Euribor index, in the face of uncertainty about the direction of interest rates in Europe, has regained the upward trend, and is already above 3.7%. In other words, De Cos's letter contains a second part. This easing for the Union's monetary institutions still “does not have a specific date, and there is still some time remaining.”
Fed, signs of a little life
The Fed is always ahead of European benchmarks, and is already moving towards the second half of 2024. Markets are waiting – almost praying – for a rate cut at the meeting scheduled for June. However, the entity's government does not want to offer guarantees either: some regional Fed leaders have already warned that “things will get complicated” regarding price controls, a reality that has already seen an uptick in inflation trigger a nationwide lockdown. January. The consensus remains around spring or the first few weeks of summer, although the numbers are still unclear. It is worth saying that due to the dual mandate of the body he leads Jerome PowellIt is also necessary to monitor the country's unemployment data, which remained at 3.7% at the end of January, a figure that allows for the extension of monetary restrictions, while there are still no clear signs of general economic weakness. If Washington does not collapse, according to community bankers, neither will Frankfurt.
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