With a message that has been telegraphed Since the last meeting in June, the European Central Bank (ECB) has remained true to its commitment and has just announced the ninth consecutive rise in interest rates in the euro zone in the last year, in what has already become the longest and most powerful cycle of increases since the institution exists. Thus, the organism will lead to theat refinancing rate at levels of 4.25%, not seen since 2008 and, therefore, equal the maximum that have occurred since the pre-financial crisis. In the same way, The ECB has also decided to increase the deposit rate to 3.75% and the marginal credit facility to 4.5%. In conclusion, it once again increases the three main reference rates in the Eurozone that will come into force on August 2.
The meeting held today within the institution in Frankfurt raised few questions among market members, so all attention will be focused on the speech delivered this afternoon by its president, Christine Lagarde, to find out if it gives clues about what can happen at the next summit in September after the summer break. In the argument published by the organization, the Central Bank insists that “inflation continues to fall, but we still expect it to remain too high for too long”, a phrase repeated in recent public appearances and that would leave the door open for a new rise. at the September meeting, about which there is no certainty in the market. In this sense, he acknowledges that “the Governing Council will continue to look at the economic data” to adopt a future decision after the summer, although he once again stressed that the rates will remain “at sufficiently restrictive levels for as long as it is necessary to achieve a return of inflation to the medium-term objective of 2%”.
In recent weeks, the truth is that Yes, there has been a change of discourse among some of the main hawks that make up the ECB, and who are those who have always been more inclined to tighten monetary policy. This is the case of Germany. Bundesbank president Joachim Nagel seems to have become what he likes to call Lagarde data dependent which simply involves waiting and seeing how the data evolves. Perhaps it is because his country, in a technical recession, cannot control the escalation of prices, as others such as Spain and Belgium are doing, where the latest CPI data falls to levels of 2%, which is the mandate and historical objective of the ECB. “Spain has demonstrated the heterogeneity that we have in the Eurozone. Inflation in Spain at levels of 2%, in addition to low unemployment rates, is not a situation that is repeated in the rest of the member states. There are countries where inflation is expected to remain high for longer and that is why we must look [separadamente] the characteristics of each one of them”, Christine Lagarde responded to questions from journalists during the press conference this Thursday in Frankfurt.
In the case of the German economy, prices in June rose from 6.3% to 6.8%. In Spain last month the CPI fell to 1.9%, while core inflation (that which excludes fuel, energy and the price of fresh food, and which is what really worries the institutions) stood at 5.9%, two tenths below May. In the Eurozone, the balance for June was a drop in prices to 5.5% compared to the figure of 6.1% previously. “Core inflation is showing its downward resistance (since it is still very close to the peak of 5.7% in March) and the ECB’s own projections do not see levels close to 2% until 2025 after revising them sharply upwards in June”, they affirm from Renta 4. These latest updated projections point to a CPI at levels of 5.4% in December, 3% in 2024 and that it will fall to rates of 2.2% in 2025. As for the underlying rate, this year, according to these same estimates, it would stand at 5.1% and then be controlled to 3% and 2.3% in two years.
Other hawk The one who has spoken these days is Klass Knot, president of the Central Bank of the Netherlands, who, although he considers that the rise in rates announced today was “a necessity”, talking about new increases in September would not be “in any way a certainty” but simply a possibility, pointed out in statements to Bloomberg TV last week. One more step back in his speech hawkish.