The worst news for those who have contracted variable interest mortgage loans has been confirmed by the Governor of the Bank of Spain, Pablo Hernandez de Cos: interest rates will remain high “for a long time”, at least until inflation is around 2%.
Hernández de Cos made this forceful statement at the Barcelona headquarters of La Caixa Foundation, during his speech ‘The economic situation and monetary policy in Europe’, organized by the Cercle Financer, while advancing that in future meetings of the European Central Bank (ECB) there will be new rises in the price of money.
The Governor has also indicated that the lag in monetary policy will cause the expected impact of the interest rate rise to take place this year and the following, “with the peak of this impact in 2024”.
In any case, he recalled that future decisions will depend on current economic data due to a context “with as much uncertainty as the current one”.
slower transmission
De Cos explained that the transmission of monetary policy presents differences with previous episodes and that some aspects “would point to a slower transmission than in the past”.
hypot
He recalled that the last rate hike was 20 years ago and that since then the economy has undergone changes that have had an impact on the transmission mechanism, and that the current cycle is preceded by a long period of expansive monetary policy with non-conventional measures, which will generate a tightening of financial conditions “for which there are no precedents”.
The high pace of interest rate hikes by the ECB is also unprecedentedwhich, according to the governor of the Bank of Spain, “could generate non-linear effects on the economy”.
One of the aspects pointed out by Hernández de Cos is the slow remuneration of retail deposits, which has explained why the remuneration of said deposits was higher than market interest rates during the period of negative interest rates and by the abundance of existing liquidity.
June
Looking ahead to the meeting of the ECB’s governing council in June, de Cos pointed out that there are “different sources of uncertainty” that will condition macroeconomic developments in the coming quarters.
The first factor is the doubts on the continuity of the savings cushion due to the pandemic and the rebound in demand that occurred at the end of the pandemic.
Related news
He has also pointed out ukrainian war as a source of uncertainty and doubts about the evolution of the world economy in the coming months, as well as “new outbreaks of bank instability”, such as the bankruptcy of Silicon Valley Bank or the fall of Credit Suisse.
Finally, it has warned that the end of the fiscal policies approved in order to curb inflation could boost the price increaseespecially in 2024, and has requested that public support measures be temporary and focus on the most vulnerable groups.
2023-07-22 10:52:51
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