2023-12-14 13:55:10
Frankfurt (Germany) (AFP) – The European Central Bank extended the status quo on its rates on Thursday, following in the footsteps of other major central banks, but left vagueness remaining on an upcoming monetary easing while inflation is on the rise. clear decline.
Published on: 12/14/2023 – 2:55 p.m.
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The main key rate remunerating deposits, the benchmark for credit in the euro zone, was thus maintained at its historically high level of 4.00%, which it had reached in September.
Also ending a turbulent year on Thursday, the British central bank left its key rate unchanged at 5.25%, judging that inflationary pressures persisted, and that its rates would probably remain high “for a prolonged period”.
While the cycle of drastic rate increases seems to be coming to an end for the main monetary institutions, the question now arises of the moment which will be chosen to ease the constraint.
“The slowdown in underlying inflation (excluding volatile energy and raw material prices) has continued” since October, but “price tensions remain sustained, mainly due to dynamic growth in costs labor units”, underlines the institution in its press release.
The ECB no longer believes, however, that inflation will “always remain too high for too long a period” with regard to its 2% objective, according to the formula which has been repeated since September 2022.
The ECB leaves its rates unchanged © Sylvie HUSSON, Samuel BARBOSA / AFP
The press release of monetary policy decisions does not, however, provide any indication of an upcoming relaxation of rates.
Quicker to foresee such a turnaround, the American central bank (Fed) “discussed a timetable for rate cuts” on Wednesday, declared its president Jerome Powell, after leaving its rates unchanged for the third time in a row.
Reduction from March?
In front of the press from 1:45 p.m. GMT, ECB President Christine Lagarde should temper expectations for rate cuts. The markets are hoping for a first easing between March and April next year.
She should once again emphasize that it is “not yet time to declare victory” on high prices, which have led the ECB to ten consecutive rate increases since July 2022, until a first pause in October.
Inflation in the euro zone has been divided by more than four since the record of 10.6% reached in October 2022, when the effects of the war in Ukraine on gas and oil prices were fully felt.
In its new forecasts unveiled on Thursday, the monetary institute predicts a price increase of 2.7% in 2024, compared to 3.2% previously, then 2.1% in 2025 and 1.9% in 2026.
Growth projections were also revised downwards for 2024, to 0.8% in 2024, compared to 1% in September, then set at 1.5% in 2025 and 2026.
The tightening of monetary policy has in fact increasingly visible consequences on the economy: the increase in the cost of credit weighs ever more heavily on businesses and households, particularly hitting real estate.
Salary increases
The ECB wants to maintain high rates as long as necessary because it fears a new surge in energy prices against a backdrop of geopolitical tensions, particularly in the Middle East.
She is also worried about wage increases which could fuel a rebound in prices.
The ECB has also announced that it intends to accelerate the reduction in the size of the balance sheet still saturated with debt acquired during the years of low inflation and Covid-19.
The institute will only reinvest half, i.e. 7.5 billion euros per month on average from July 2024, i.e. six months earlier than planned, the debt acquired as part of the emergency plan against pandemic (the “PEPP”) launched in 2020.
These reinvestments will stop at the end of 2024, according to a press release.
Other central banks decided on Thursday to maintain their monetary course: the National Bank of Switzerland did the same, maintaining its main rate at 1.75% while inflation, which fell to 1.4% in November, remains below monitoring.
The Bank of Norway, noting that inflation remains too high, raised it for the fourteenth time in more than two years, by 0.25 points to 4.5%. But she plans to keep it at that level “for a while.”
© 2023 AFP
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