José Ramón Iturriaga: Lagarde throws the brake

Last week the European Central Bank met the script: interest rates lowered a quarter. Now, against what you could think a few weeks ago, they don’t seem to go down much more. In recent weeks, … Some responsible for European monetary policy have indicated that current levels can be adequate. The German Isabel Schnabel, member of the ECB Executive Committeea few days ago it emphasized that the neutral rate of interest rates – that, the theoretical level in which the types do not affect growth or prices – in the euro zone it is located above where until now they had thought and not far from the current levels. He also believes that in the current situation in which prices continue above the long -term objective of monetary policy, it is probably necessary to stop lowering the types and see what happens. He insisted that, with current interest rates, the credit demand was not being reached at all. These were probably the reasons that led to the decision of last week in Frankfurt was not unanimous: there was an abstention.

In addition, in the press conference after the meeting of the Executive Committee, its president, the French Christine Lagarde, insisted that, although prices are going in the right direction, the latest events that had not yet incorporated into their analysis could influence their projections. The turn of German fiscal policy, added to the European Defense Plan, is undoubtedly influenced by both future inflation and growth. In these circumstances it is foreseeable that the ECB has to modify its monetary policy.

Thus, the drop of types last week may be the last decrease of types in this cycle. The circumstances have changed substantially in recent weeks and the Central Bank will have to adapt its policy. In any case, after the strong declines of recent months, the types are already at a level that we can consider expansive. What can undoubtedly be ruled out is that interest rates will return to extraordinarily low levels such as those we lived a few years ago, which is certainly very important for capital markets. We have returned to textbooks, for money to be worth something, and although some may weigh, we will not return to that situation that was something exceptional. An exceptionality that remained for a long time, but exceptionality.

Session boundary

• Access to premium content is open by courtesy of the establishment where you are, but right now there are too many users connected at the same time. Please try it after a few minutes.

Try again

You have exceeded the session limit

• You can only have three sessions initiated at the same time. We have closed the oldest session to continue sailing without limits in the rest.

Keep sailing