The president of the institution, Christine Lagarde, has changed his tone and worries about inflation, even if it retains the status quo for the moment for his monetary policy.
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The European Central Bank seems to have started a turn on Thursday, February 3. After insured, in December 2021, a rise in rates would be “very unlikely” in 2022, Christine Lagarde, his Chairman, his president, refused twice to repeat the same words during the press conference that followed the meeting of his Board of Governors. Instead, she stated that her December words “were attached to conditions”, especially the evolution of inflation.
In the euro area, consumer prices increased by 5.1% in January, their highest level since the early 1990s, significantly above the official mandate of 2% of the ECB. They exceed 6% in Spain, 7% in the Netherlands, 8% in Belgium and even 12% in Lithuania. The question “worries everyone around the table of the Board of Governors, highlights M me Lagarde. “Inflation may well be much stronger than anticipated,” she says.
“The ECB begins to change your tone, commented Mathieu Savary, from BCA Research, a research group and investment advice. We are getting closer to a rise in rates.” He bets on a first increase towards the end of The year. Currently, the ECB’s deposit rate is – 0.5%, unchanged since September 2019.
The specificity of the ECB
The words of M me Lagarde have reacted the markets pretty strongly. The ten-year borrowing rate of France rose from 0.45% to 0.58%; That of Germany is now clearly above zero, at 0.15%; The Italian rate has become more tense, from 1.45% to 1.65%. The era of free loans seems to be really moving away. European scholarships dropped in the wake (- 1.5% for the CAC40), worried about seeing a monetary tightening.
Financial markets, however, seem to get carried away, betting on four increases in the ECB rate this year. “It seems far too aggressive, like vision,” says Savary. M me Lagarde tempered the ardor. She repeated that any increase in the rate would follow a slow sequencing: first the end of debt purchases by the ECB, which will take several months, and then then a rise in rates. Clearly, such a gesture remains distant.
In addition, the change of tone during the press conference does not diminish the specificity of the ECB among the large central banks. The US Fed announced an increase in its rate as early as March. Thursday, the Bank of England increased his for the second time in two months, from 0.25% to 0.5%. In comparison, the ECB has not changed anything yet.
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