Lagarde holds firm on rates and damages Italy: the effect on indexed BTPs and “food inflation”. Analyses
Christine Lagarde it is holding out on rates but in doing so it is pushing the EU to the brink of recession. High rates in fact mean higher cost of money and higher interest increase in public debt and problems for companies that cannot source money at low costs. The goal is to have a inflation at 2% while it had also reached 10%. But the horse treatment risks having the opposite problems and for this reason it is not well regarded by the States.
The President of the European Central Bank told broadcaster France 2: “If we win the battle against inflation, that is, if we have the certainty that inflation will actually be at 2%, then rates will start to fall. The latest data for the fourth quarter of 2023 indicates that growth is likely to remain moderate, while the labor market is expected to slow. Growth is expected to start recovering in early 2024, absent further shocks.”
But all this, as we were saying, has a cost on the economy and itself Lagarde is fully aware of this: “The available short-term indicators suggest a continuation of the weakness in economic activity in the fourth quarter of 2023.” In the interview the journalist naturally asked what she predicted for the future but the answer was elusive: “I think they have reached their peak but I can't give you a date.”
The Minister of Economy Giancarlo Giorgetti instead it was clear: “With lower growth than expected, a Debt that doesn't go down can be a problem. But I expect monetary policy to change direction soon after inflation has plummeted as a result of the collapse in energy prices rather than Frankfurt's choices. If you ask me what I expect from 2024, I expect first of all the rapid start of a process of decreasing rates, which would offer us significant margins” (retrieve the article on the topic here).
However, Lagarde and also governments know very well that inflation is constructed from a basket of goods and services which on average contribute to determining it, then each of these items has a different specific weight. For example, in Italian caseL'”food inflation” is much higher than the average value and Italians who go shopping know this, like the “energy inflation“It costs and weighs a lot, so much so that the government had to launch a bonus system for the poor.
Who, in the middle class has bought for example Inflation-indexed BTPssees a decline in his coupon which however does not compare precisely with the inflation with which he has to deal with his social class, which mainly experiences “coffee cup inflation”.
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