The European Central Bank (ECB) gave up on cutting interest rates by 0.5 points in December to avoid giving the impression that the economy was “worse than it really is.” Minutes of the previous meeting decided by the financial institution’s board of directors The official “price” of money drops by 0.25 points for the fourth time.up to 3%, with some governors reportedly requesting even larger cuts.
“Some members [Consejo de Gobierno] He noted that the 0.5 percentage point rate cut at the current meeting was justified. [la de diciembre] And they would have supported further study of the possibility of a broader decline,” the ECB minutes said. Published this Thursday.
“These members highlighted the deterioration in the economic outlook for the euro area. Continuous projection exercise And, amidst much global and national political uncertainty, risks to growth are to the downside,” the document continues.
The Board is composed of the Central Bank Governors of each Euro Partner country and members of the Executive Committee, chaired by Christine Lagarde, Vice-Chairman Luis de Guindos, and chaired by the Chief Economist and other members. Serves as Such as Isabel Schnabel, who is German and the main referent of the “hawks” (the most orthodox).
Some members of the board stressed in December that “broader interest rate cuts would provide insurance against downside risks to growth,” according to the minutes. “Furthermore, if the economy does not recover, there will be an increased risk that inflation will fall below target.” [teóricamente el 2%]”This suggests that monetary policy could become overly restrictive, with interest rates still far from neutral.” It has not been made clear what it is.
New products coming at the end of January
The minutes of the last ECB meeting also included the following in the current situation of sluggish economic activity in the euro area:except for spain–, December debate “suggested another rate cut in January” [la próxima decisión es el día 31 de este mes]”.
On Monday, December 16, just four days after the last official interest rate cut, ECB President Lagarde said in a speech in Lithuania that the roadmap: “We will continue to lower interest rates.”.
As knowledgeable sources have confirmed to elDiario.es, for the year ahead, the organization’s calendar calls for four further cuts of a quarter point each in the coming months until the official price reaches 2%. It is supposed to be done. .
What is not certain is whether this will be the lower end of this cycle of loan easing, after significant interest rate hikes were approved to stem the inflationary hemorrhage caused by the invasion of Ukraine. There are questions about whether the ground will be lowered. This is where the discussion of the “neutral interest rate,” the philosopher’s stone of monetary policy, comes into play. As described in this report.
In this way, the ECB continues to improve its “official” lending conditions, which are automatically transferred to Euribor, reducing the prices of mortgages and loans in general and breathing oxygen into economic activity. In other words, financial institutions are continuing to reverse the austerity measures they began introducing in 2022 precisely to suppress demand and fight inflation.
The rate increase cycle began with a base rate of -0.5%, reaching 4% in autumn 2023 and remaining at this level until the ECB begins to exit before summer 2024, given evidence that price growth has slowed. . After the impact of the energy crisis and bottlenecks in global trade due to the end of the pandemic.
Since then, the agency’s Governing Council’s concerns have shifted from its primary responsibility, inflation, to economic stagnation across the eurozone, primarily due to a slowdown in the EU’s two largest economies.
