The European Central Bank (ECB) keeps the price of money stable in the Eurozone for the second consecutive time and is getting closer to confirming what it does not mean in words: that the rise in interest rates has already peaked. Thus, official rates will continue, at least, until the next monetary policy meeting scheduled for January 25 at levels of 4.5% in the case of the refinancing rate, 4% in the deposit facility and 4.75 % the marginal credit facility.
With the decision already discounted, the market has clearly focused on the speech that Christine Lagarde will give in less than an hour, in charge of relaxing the spirits of investors who are betting on up to 125 basis points of reduction on the current level of rates. next year. This cut – which would alleviate the financial burden of many households with variable rate mortgages – would drive the official rate to 3.25% within twelve months. However, large international banks and investment firms believe that the market is being excessively optimistic.
Frankfurt will also review the macroeconomic picture of the euro zone, something it has not done since September because the forecasts are made on a quarterly basis. There the market can find keys to decide whether or not there will be cuts, although what is taken for granted is that Lagarde will follow in the footsteps of Jerome Powell, president of the Federal Reserve. Yesterday, the Fed once again kept rates intact, which in the US are in the range of 5.25-5.5%, but, above all, it made it clear that 2024 will be a year of reductions in the price of money after a year and a half of an unprecedented escalation. The forecasts revealed by the central bank contemplate up to three decreases over the next year of 0.25 percentage points each. And this could be one more guide for the ECB’s future decisions.
At the moment, the central bank has data that favors this thesis. Last month the Eurozone CPI fell to 2.4%, the lowest since July 2021, compared to 2.9% in October, while core inflation was 3.6% compared to 4.3% of the previous month, which reflects that monetary policy is moving to all spectrums of the economy. THE central bank’s price objective is 2%.
The Bank of England (BoE), next to speak out, decided today at its December meeting to keep interest rates at 5.25%, and does not touch rates for the third consecutive time. The organization understands that “there is still a way to go” in the fight against inflation. It closed October at 4.6%.