2023-10-29 09:07:54
After a series of ten successive increases since July 2022, the European Central Bank has decided not to increase its rates.
The European Central Bank (ECB) opted for stability by keeping its rates unchanged on October 26, ending ten consecutive increases since July 2022. The ECB’s main key rate, used as a benchmark for credits in the euro zone, remains at 4%. Analysts estimate that a possible rate cut will not occur until the second half of 2024 at the earliest. The refinancing and marginal lending facility rates remain at 4.50% and 4.75%, respectively.
During September, the European Central Bank, led by France’s Christine Lagarde, engaged in a heated debate within its governing council to determine the best course of action in response to conflicting signs of economic slowdown and inflationary pressure. Ultimately, the ECB chose to raise all its key rates in an effort to curb price increases. Despite this, inflation in the eurozone was lower than expected, falling from 5.2% in August to 4.3% in September, and returning to its previous level in October of the same year. Even though the ECB noted that inflation was “ clearly decreasing “, she recognized that it would have to remain at too high levels for a prolonged period.
According to the ECB, the risks of renewed inflation persist and are increasing
In September, lending to the private sector in the euro zone slowed, showing the continued impact of rate hikes decided by the ECB to curb inflation. This situation worries real estate, because these increases make credit more expensive, affecting households and businesses. The ECB is also monitoring geopolitical tensions, notably the conflict between Israel and Hamas, which might lead to a rise in energy prices, creating uncertainty among businesses and households.
The governor of the Bank of France is confident that inflation should stabilize around 2% by 2025. However, inflationary risks are increasing due to the crisis in the Middle East, leading to a rise in oil prices and gas. The question of future salary increases therefore remains crucial.
The ECB is maintaining its rates, following other central banks. In the United States, the Fed maintained its rate, while the Bank of England did the same following 14 consecutive increases. What will happen next? In any case, “Future decisions by the Governing Council will ensure that its key rates are set at sufficiently restrictive levels, for as long as necessary,” warned the ECB on October 26.
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