It is very likely that Christine Lagarde will not make a first rate cut under the Italian tree. What a shame, because it would have been a nice gift, especially now that inflation is falling, ticking the list of alibis in favor of the Eurotower. And the Federal Reserve will also be delaying, as it must decide today to keep the cost of money unchanged, between 5 and 5.2%. The Frankfurt round, however, will take place tomorrow. While they wait for central banks to decide to apply the brakes, Italians are sweating a lot just to be able to pay their mortgages. In October, the interest rates on loans granted in the month to families for purchasing housing including expenses were in fact at 4.72%, compared to 4.65% in September, calculated the Bank of Italy. Thus, the interest rates on new loans to companies and non-financial entrepreneurs were equal to 5.46% (5.35 in the previous month), those for amounts up to 1 million euros were equal to 5.95%, while the interest rates on new loans for amounts exceeding this threshold stood at 5.17%.
In short, the ten shocks given by the ECB are having their effects, restricting credit to the real economy. This is demonstrated by other figures, also released by Via Nazionale, which confirm the tightening. In October, credit to the private sector decreased by 3.2% in twelve months (-3.6 in the previous month), while credit to families decreased by 1.1% in twelve months (it had fallen by 0.9% in the previous month) . ). Finally, those destined for non-financial companies decreased by 5.5% (-6.7% in the previous month). And to think that October was the month that marked the stop of the ECB’s rate increases, that cycle of tightening the cost of money that characterized the previous ten sessions of the European Central Bank.
Meeting in Athens at the end of October, the Frankfurt Governing Council decided to keep the rates unchanged: for main refinancing at 4.50%, for deposits at 4% and for marginal loans at 4.75%. Now, the ECB will meet next Thursday, December 14th, to update its estimates on the Euro Zone and give indications on monetary policy. Market expectations are now for cuts in the cost of money from the first half of 2024, both by the Fed and the ECB. In other words, given the rather long time it takes to assimilate the reduction in rates, there will still be some suffering.
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.
