Despite the risks of recession, the large argentiers of the planet promise to increase interest rates in order to stop the rise in prices.
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Located in a windowless room in the middle of the splendid hills of Sintra, in Portugal, the main bankers on the planet wanted to send, Wednesday, June 29, a message of absolute determination to fight against inflation. Whatever the economic cost.
Jerome Powell, Christine Lagarde and Andrew Bailey, respectively the central banks of the United States, the euro zone and the United Kingdom, were gathered for the traditional annual conference organized by the European Central Bank-the first in physical form from the pandemic. With an inflation that exceeds 8 % in each of the three regions, very far from their target of 2 %, the three of them were expected at the turn: they will continue to increase their interest rates while the savings show disturbing Signs of slowdown?
“Our mission, our work, our mandate is to ensure price stability, and we will take 2 % 2 %”, replies M me lagarde. “To reduce inflation, you have to slow demand, adds Mr. Powell. Is there a risk that we are going too far? Yes, but I don’t think this is the case. And above all, this would make a much worse error than to fail to control inflation. “While defending it, he suggests that he prefers a recession to unbridled inflation.
” where go come growth? “
The great Argentiers therefore promise to continue the path to the “normalization” of their monetary policy. The ECB, whose deposit rate is currently – 0.5 %, will increase it by 0.25 points in July – a first in eleven years – and undoubtedly 0.50 points in September. By the end of the year, four increases should have taken place, for an interest rate close to 1 %. In the United States, the Fed has already produced three increases, for a total of 1.5 points. Its rate, today in a range between 1.50 % and 1.75 %, should still double by the end of the year. The Bank of England follows a similar trajectory.
Mas in parallel with this monetary hardening, the problem is that the oil shock crosses the world is giving a very serious brake on growth. “We are in full slowdown and the recession seems inevitable,” said Erik Nielsen, an economist in Unicredit, an Italian bank. For him, the world economy, and especially the euro zone, faces a storm on all fronts. “We have the highest drop in the purchasing power of recent memory, global trade slows down, the States reduce their budgetary aid … Where will the growth come from?” Mr. Nielsen does not bet on a catastrophe scenario, believing that The recession should be limited, but he is worried about seeing central banks increase their interest rates too quickly.
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