Mortgaged borrowers are still very aware of the evolution of interest rates. After a cycle of significant increases, last October they saw how this escalation was slowing down.
The European Central Bank (ECB) dares to set a date for the first cut, something that those who have a loan are awaiting with great expectation.
As expected, we will still have to wait until 2024, specifically until the middle of next year. The Greek representative on the Governing Council of the ECB, Yannis Stournaras, also announced what must happen.
The essential condition for rates to be lowered is to achieve inflation below 3%. This fall must be “permanent and sustainable,” he maintains in an interview with the German newspaper Handelsblatt. The governor of the Central Bank of Greece believes that they have already reached their peak.
The speech he proclaims differs quite a bit from that of some of his companions. Other members of the central body prefer to remain cautious and remember that the cuts will still take a while to arrive. President Christine Lagarde herself recently pointed out that this is “a premature debate.”
Stournaras points out that right now “we are in restrictive territory, no matter how you look at it.” He is clear that the rate increases have had a significant impact on the economy. In fact, he emphasizes that “it is much weaker than we thought in September.”
Less optimistic messages for mortgage holders
His Latvian counterpart, Martins Kazaks, is not so optimistic. He points out that the ECB would need to see “a very drastic change” in the economic prospects of the European territory to carry out the rate cut. In his opinion, there would have to be an increase in unemployment or a collapse in activity to consider this option.
He confirms that “we have seen a sharp decline in inflation rates, but they are still well above 2%.” He intends to be cautious with his message especially because there are “risks that inflation becomes persistent at higher levels.”
The Latvian representative adds that it would be “incoherent” to reduce borrowing costs during the first half of 2024. Especially with the current “macroeconomic outlook.”
The French governor, François Villeroy de Galhau, is more cautious in his speech. He explains that “the state of the economy justifies the interruption of the series of rate hikes.” He adds that monetary policy “must be guided from now on by confidence and patience.”
Analysts are not very clear
There are signs that invite those who have a mortgage. The interannual CPI for October stood at 2.9%, less than one point from the 2% objective set by the ECB. This has been possible thanks to the deflation of energy prices and the moderation of food inflation.
There was also a reduction in underlying inflation among goods and services. “This is consistent with the growing weakness of demand in the eurozone,” says Tomas Dvorak of Oxford Economics. Hence they suspect a “turn in ECB policy ahead of schedule.”
He considers it likely that the rate cut will take place at the beginning of the second quarter of next year. Another analyst, Jörg Krämer, from Commerzbank, expects that “interest rates will remain the same until 2024,” he says. The Economist.
In his opinion, there is a good chance that “inflation will be above the 2% target next year.” Above all due to the sharp increase in salaries. Therefore, we will have to be very attentive to the decisions adopted by the European Central Bank in the coming months.
2023-11-03 18:26:28
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