Yes, in 2024 inflation will drop to 2.6%. And yes, at the end of this year the cost of living in the euro zone will reach 5.6%, against the current more than 7 percentage points. It is a pity that all this is not enough to convince the European Central Bank to pull the emergency brake, before companies, families and, perhaps, the banks themselves (the case of the SVB in the USA teaches us) explode. Two days ago, Frankfurt not only brought the cost of money closer to 4%, to 3.75% to be precise. But he clearly hinted that May is not the last walk. We’ll talk about this, in short, at least until the end of the summer, when mortgage payments will become unsustainable for many families. But someone should remind Christine Lagarde that inflation expectations are decreasing. At least according to most European private economists. Translated into numbers, for this year as a whole, experts now project an average cost of living of 5.6%, which should slow down to 2.6% in 2024. According to the latest ECB survey, the expectation in 2025 is reinforced in one tenth point to 2.2%.
The survey (Survey of professional forecasters) does not represent the forecasts of the ECB itself, but an average of the expectations of private sector specialists monitored by the institution itself. That would be enough to put the flea in Lagarde’s ear. It’s not over. Still according to the same group of economists, however, growth expectations for this year have strengthened to 0.6%, compared to the previous 0.2%, while those for 2024 have decreased to 1.2% and 1.6% for 2025. For unemployment, however, expectations have dropped to 6.8% this year and next and to 6.6% in 2025.
Now, in the absence of braking, there is a risk of serious collateral damage to the economy. The president of the Italian banking association, Antonio Patuelli, is convinced of this and, from the columns of Corriere della sera, he makes the tip clear: “the transmission” of the monetary tightening that the ECB continues to operate we will see in the coming months and it is important that recent dossier from the Centro de Estudos da Confindustria: it shows that corporate defaults develop not so much immediately when rates go up, but after a few months, so I am very concerned». And it would be better to tighten their belts: «company bankruptcies then lead to the deterioration of bank credits, to an increase in bad loans that we have already seen in the last two months. Hence the need for new allocations of profits to the equity reserve”.
Source: IL Tempo
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
