Restrictive rates as long as necessary, this is the decision of the ECB announced in Bulletin no. 3 of 2024. The Eurotower specified that “inflation is expected to fluctuate around current levels in the coming months, and then decrease until reaching the target of 2 percent next year”. There was no shortage of criticism, including that of Senator Gelmetti (Fdi) who spoke of “unholy interest rate policy”. Here are all the updates.
Inflation trends and criticisms
The ECB Bulletin clarified that the trend in inflation will be due to “weaker growth in labor costs, the unfolding of the effects of the restrictive monetary policy pursued by the Governing Council and the waning impact of the energy crisis and the pandemic ”. On the issue, Fratelli d’Italia senator Matteo Gelmetti, member of the Budget Commission, stated: “The European Central Bank dampens the hopes of families and businesses, who were hoping for a significant drop in interest rates. The ECB’s wicked interest rate policy continues, which in doing so depresses the economy and oppresses families. This condition of political and financial Europe must change and we hope that from 9 June a strong signal will arrive from the Italians.”
The preventive constraint
Brussels then specified that there will not be a preventive constraint to a particular rate reduction path. The note continues “if an updated assessment of the inflation outlook, the dynamics of underlying inflation and the intensity of monetary policy transmission were to further strengthen the Governing Council’s confidence in a stable convergence of inflation towards the target, it would then be appropriate to reduce the current level of monetary policy tightening.” In all circumstances, the Governing Council will continue to adopt an evidence-based approach to determining the appropriate level and duration of monetary policy tightening. restrictions. Decisions will be taken from time to time during each meeting, without being tied in advance to a precise rate-setting scheme.
Credit, demand is weak
Although there has been a slight decrease in interest rates for business loans and mortgages, the possibilities for obtaining financing remain limited and credit growth continues to be affected by fragility. In February, average interest rates on business loans fell slightly to 5.1% from 5.2% in January, while those for mortgage loans went from 3.9% to 3.8%. However, the high level of debt and the reduction in investments led to a contraction in the demand for loans in the first quarter of 2024. Financial institutions maintain restrictive criteria for granting financing, with a slight restriction for businesses and a moderate easing for mortgage loans. Overall, credit growth remains subdued.
In February, bank loans to businesses increased 0.4% year-on-year, up slightly from 0.2% in January.
