ECB President Christine Lagarde said she was confident that the ECB Governing Council could find a majority in favor of the first rate cut in the summer. “I would say it’s likely,” Lagarde told Bloomberg in a television interview from Davos, where she is attending the 2024 World Economic Forum. Of course, there is no certainty right now. “I need to be careful,” Lagarde explained, on the one hand, decisions will be taken based on the next incoming data, but at the same time, “each member of the Governing Council has its own opinion and evaluates its own national data, which is different from the previous ones.” from country to country”.village”.
The rise and fall of the last few weeks
Therefore, the ECB is preparing to reverse its course in July 2022, when it begins to revise upward the interest rates on the money it lends to other banks in order to fight inflation. In just over a year, rates went from 0.5% to 4.5%; This increase had a direct impact on mortgage rates. To the complete disadvantage of those who have recently taken out a variable rate loan or a fixed rate mortgage.
There have been timid signs for several weeks that the trend is reversing. Just yesterday Abi (Italian Banking Association) announced that the average rate for new transactions for the purchase of a house in December recorded a small decrease, rising from 4.50% in November to 4.42% in the month 2023 of last year. This is probably a decline that does not yet justify the possible use of mortgage subrogation (i.e. transfer of the loan to another bank with more advantageous terms) or renegotiation.
But things could change if the ECB starts cutting interest rates significantly. However, it is very likely that the central bank’s interest rate cut will not come before the summer and in any case everything will depend on the inflation trend in the Eurozone, which started to rise again in December and reached 2.9% from 2.4 in November.
Patuanelli (Brother): “I am afraid that the decision will come late”
Abi’s president, Antonio Patuelli, is not so optimistic. Speaking on the sidelines of the ABI Executive Committee in 2010, he said, “I’m afraid we will be late to decide on reducing official discount rates, meaning we will wait for all of Europe to go below 2 percent.” Milan is instead hoping for “a more timely and gradual decline”.
“The inflation trend in Europe is not uniform, and those holding back the cuts come from Northern Europe. Northern Europe is the country that takes the least risk from the Red Sea blockade. Therefore, this dynamic is on average as follows: Inflation in eurozone countries is unpredictable,” Patuelli said. “The fact is – the ABI chairman added later – that for a month and a half market rates have changed and fallen, with benefits for those who have variable-rate loans or are considering new loans. These are real data. The ECB debate is something that will have further implications, but the market has not allowed me to discuss official interest rates.” and reacts differently each day to decisions not to make a decision.”
Source: Today IT
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.
