2023-06-16 07:29:00
Rising rates in Europe, lowering in China, pause in the United States: monetary policies took different directions on Wednesday and Thursday in the three main world economies.
It’s been a turbulent week for central banks.
The central bank of China has, to the surprise of analysts, reduced its key short-term interest rate, following having already adjusted several other rates. Two days later, the interest rate for its one-year loans to financial institutions (MLF) was in turn lowered to 2.65% once morest 2.75% previously.
The measure should encourage commercial banks to grant more credit on more favorable terms, in order to support the economy, which is currently struggling.
The US central bank, the Fed, marked a pause in rate hikes, following ten straight hikes that pushed them up five percentage points to the 5.00-5.25% range.
The goal: to take the time to observe the evolution of the economy, before continuing the cycle of hikes if necessary, while inflation has slowed. With rate hikes taking months to act, the Federal Reserve wants to avoid plunging the economy into recession.
As for the European Central Bank (ECB), it continued its fight once morest inflation, with an eighth increase in less than a year, by a quarter of a percentage point.
For its part, the Bank of Japan (BoJ) maintained its ultra-accommodative monetary policy unchanged on Friday, thus continuing as expected to estimate that the conditions for growth and inflation are not met in the country to start tightening. the screw of credit.
WHY THESE DIFFERENT DIRECTIONS?
‘Each central bank mainly focuses on its own economy. Different circumstances call for different monetary policy,” David Wessel, Fed specialist for the Brookings Institution, told AFP.
Thus, the central bank of China “fears that its economy will slow down too much” while the Fed “is concerned regarding the growth of its economy too fast to bring down inflation”, he detailed.
The Chinese economy is indeed weighed down by the over-indebtedness of the real estate sector (a traditional pillar of growth), consumer confidence at half mast and the global economic slowdown which is weighing on demand for Chinese goods. But unlike Europe or the United States, inflation is almost zero.
The American pause and the European recovery “are not as different as one might think,” said Joseph Gagnon, economist at the Peterson Institute for International Economics (PIIE), in an interview with AFP.
This former Fed economist points out that a break has indeed been announced, but ‘what is much more important is that they have signaled that they still have a lot to do’ to bring inflation back into line. nails.
No break, however, for the ECB, which “started later and more slowly”, he added.
AND IN THE COMING MONTHS?
Additional increases are expected on both sides of the Atlantic.
At the Fed, ‘almost all’ officials ‘see as probable the fact that further rate hikes will be necessary this year to bring inflation back to 2%’, Jerome Powell stressed on Wednesday, but at ‘a moderate’.
As for ECB President Christine Lagarde, she warned on Thursday that another rate hike was “very likely” at the July meeting.
But how far? Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, anticipates two more quarter-point hikes, in July and then September, taking the rate ‘to 4.0%, which we believe will be the terminal rate’ .
The ECB “wants to see more convincing signs that the labor market is cooling and price pressures are easing before they ease off,” said Jack Allen-Reynolds, economist for Capital Economics.
As for the Fed, the cycle of hikes might resume in July, and rates might, by the end of the year, be raised by a total of half a point to an additional point, according to Joseph Gagnon.
China should experience the opposite movement, with additional rate cuts to continue to support the economy.
‘They are proceeding in small steps’, specifies Joseph Gagnon, who believes ‘they still have a lot to do’, and anticipates ‘several months’ of ‘very weak growth’ in the Middle Kingdom.
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