Hands free on fees, without conditions or forms of pressure. In short, Christine Lagarde is a single woman in charge. After the reduction in interest rates carried out on September 12th, the European Central Bank put its position on paper in the last bulletin, reiterating that it “does not intend to be bound by a particular path of reductions: the Governing Council will continue to follow a data-driven approach, according to which decisions are defined periodically at each meeting”, reads the bulletin issued in Frankfurt.
Rate decisions “will be based on its assessment of the inflation outlook in light of the most recent economic and financial data, underlying inflation dynamics and the intensity of monetary policy transmission.” All with the aim of returning inflation in the euro area to the target level of 2%. According to Frankfurt, “domestic inflation remains high, driven by wages that continue to grow at a rapid pace. However, pressures on labor costs are easing and profits are partially mitigating the impact of rising wages on inflation. Financing conditions remain restrictive and economic activity remains modest”. .”
Of course, there are those on the other side of the Atlantic Ocean, at the Federal Reserve, who took a little longer before changing rates, but when they did they made a 50 basis point cut, intoxicating the markets’ euphoria. Returning to Europe, on September 12th the rate that is still seen as the main market reference, the deposit rate, was reduced by 25 basis points to 3.50%. Certainly, if the Central Bank wants to find new support, it will find it in inflation forecasts that favor a restrictive monetary policy, at least in the short term. “Inflation”, specified Eurotower, “is expected to increase again in the latter part of this year, also because previous sharp falls in energy will no longer be included in the calculation of twelve-month rates and perhaps only from the middle of”. next year we will see a steeper drop in the cost of living. The timing, however, is clear, prevailing expectations are for a further rate cut in December, while uncertainty remains about October, but any continued worsening of the economic situation could favor a reduction. on that occasion too.
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.
