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Four rate hikes in five months: Is it over, or is there more to come?



The European Central Bank (ECB) made its fourth hike in interest rates since the end of July. Money is already at 2.5% after today’s 50 basis point increase, but this may not be the last short-term move for the monetary institution. What can we expect for 2023? The main problem that the organization headed by Christine Lagarde has to face is inflation. The Eurozone CPI has been on a 17-month streak of rising straight, and in November changed trend with a six-tenths decrease. However, it persists at extremely high levels. In the eleventh month of the year, inflation in the eurozone was 10%. That number, still in the double digits, is a primary concern of the European Central Bank, which has a mandate to ensure price stability. This is why the upward trend in rates started at the end of July and continued in September, October and December of this year. Related news Standard number This is how the new increase in interest rates at the European Central Bank will affect mortgages Analysts expect the Euribor rate to reach 3% at the end of December, which will make loans more expensive. What the European institution will do in 2023 is still unknown because everything will depend, to a large extent, on how the CPI develops. In addition, interest rate increases are being calibrated so as not to lead Europe into a very deep recession, which is already practically discounted. For now, what analysts agree on is that inflation levels will affect everything, but these increases in the price of money will not end with today’s rally. The truth is that every house analysis and expert gives a different figure for how far interest rates can go. Nomura Bank talks about interest rates at 3.5% in the eurozone in 2023; Gonzalo Gortazar, CEO of Caixabank, mentioned the 4% barrier a few weeks ago. Singular Bank aims for 3% … Juan de Lucio, economist and professor at the University of Alcalá, is one of those who believe that the price hike is not over yet. “I think rates will exceed 3%. And compared to the US, we’re behind, with 10% inflation in the eurozone, and we haven’t started to back off monetary expansion. It is dangerous to default, and once prices start to rise, it is normal for them to continue.” This expert points out that inflation drives pretty much everything, but rising prices will also depend on “growth and looming economic uncertainties: if war is in Ukraine will decrease in intensity, if prices for raw materials fall, if tensions decrease … ». Of Funcas, Conjuncture Director Raymond Torres points out, “The main reason prices will continue to rise is that inflationary pressures remain high, and therefore the ECB cannot lower its guard. On the other hand, in such an uncertain environment, it is not It is clear whether inflation will fall to the 2% target on a reasonable horizon.” In this sense, this expert points out that today’s interest rate hike “must be followed by two more by a quarter of a point each, so that the main reference rate, i.e. the deposit facility, reaches to 2.5% and the refinancing rate to 3%. For his part, Rafael Moral, Head of Mortgage Analysis at Hipoo, points out that with Vision 2023, what is expected is that the ECB will not continue to raise interest rates as ostensibly as in recent months. This is because Mainly to “a sense that inflation has begun to be contained, although the challenge for next year will not be simply to contain it but to reduce it.”

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