The European Central Bank (ECB) follows its own. Although the Federal Reserve has decided to freeze the decreases of types in the face of the strength of inflation, The ECB has announced the Fourth decrease in consecutive types of 25 basic points, which is the fifth cut since June, leaving the price of money at 2.75% (the deposit rate, where banks keep their excess liquidity), According to the statement. The main type of refinancing (where banks park their excess liquidity) is reduced to 2.90% and marginal credit ease (where banks come urgently to borrow) falls to 3.15%. In this way, the Spred Among the types of the euro and US zone is already expanded above the percentage point. The Fed has maintained the types between 4.25 and 4.5%.
Waiting for the statements of Christine Lagarde, president of the ECB, LThe markets anticipate 100 basic type cuts points this year. “Although we expect the ECB to cut more, we see the risk of a new aggressive market reaction in December if Lagarde does not commit to end this cycle of cuts,” they explain from Danske Bank. Inflation remains above the target, but forecasts speak of a moderation towards 2% relatively rapid. This generates certain doubts in the Governing Council of the ECB, so it is worth analyzing what is happening and what the experts say.
The general inflation of the Eurozone (IPC) recounted two tenths to 2.4% year -on -year in December, while the underlying inflation (which excludes food and energy) has been in 2.7% for four months (it is the lowest rate since December 2021, but still far from the 2%objective). With the data of January he published next week, December was the last one who had the ECB on the table before his appointment this Thursday. And in December, two were the elements attracted attention: on the one hand, the energy (the famous base effect taking it up and rising oil), on the other, the services, which still recorded a worrying 4% interannual, level at which they have been practically two years.
This initial reading generated some concern between analysts and operators. However, with the pass servicesindicate from CaixaBank Research, the indicators point to a moderation of services in the next quarters, both for the fading of idiosyncratic pressures in different items (for example, insurance, transport and tourist services) and for the absence of second round effects . These same economists also speak a slowdown of wages and compression of business margins that will reassure Eurobanco officials.
In the front of the energyrebounds are expected, but it does not seem to be jeopardized by the ECB path. “If the recent movement of energy prices persisted, there would be the risk of noise in communications and some delays in the cuts cycle, especially after the March meeting. We believe that slower cuts before a shock In energy prices they would end up leading at least at the same end point for official interest rates (1.5%), if not lower, ”argues Rubén Segura Cayuela, from Bank of America (Bofa).
In addition, the analyst adds, even if the energy brings the risk of a slightly higher inflation in the short term, it will potentially bring less growth and inflation in the medium term. “The average barrel price of oil It has increased approximately 13% in euros since the deadline of the last projections of the ECB, although this is not enough, in our opinion, to derail the cut of the ECB, “Hugo Le Damany and François Cabau, of Axa IM.
“We believe that inflation can fall faster than the provisions of the ECB, suggesting that the ECB could act faster with the cuts of interest rates and cut them in 50 basic points in March. Therefore, the January and February inflation figures They will be crucial, “they are launched from the Swedish Bank Seb. However, data such as the CPI of Spain in January, which has returned to 3% year -on -year, will once again impose caution. However, the underlying inflation has been reduced two tenths up to 2.4%.
The time of truth comes now
However, the key will be that what comes after this meeting and each IPC data will be important. Some analysts believe that from now on, the complicated arrives, others believe that the hard will be from March. From the first opinion are Oxford Economics economists who explain that “beyond the January cut it becomes more uncertain is the rhythm of flexibility later, with the update of the March forecasts, energy prices, inflation, inflation imported and the impulse of services as key factors to take into account. “
However, there are others, such as Danske Bank experts, who see it complex beyond March, when things become much more questionable. The uncertainty of the market about the possibility of continuing to produce type cuts during the second quarter is well founded. Consecutive 25 basic points in January and March will reduce the type of reference from 2.5% ECB. This is the upper limit of the rank estimated by the ECB officials for the neutral type of the Eurozone. This interest rate is considered as the threshold or the area in which monetary policy pivotes to be expansive or restrictive. Bringing the types below the ‘neutral’ is to bring monetary policy to the expansive zone, that is, interest rates begin to stimulate credit, consumption and investment, pressing up, in theory, inflation.
As the types fall at this level, the internal debate of the ECB is probable to be exactly the neutral type, which increases the possibility of fracturing the current moderate consensus among those responsible for monetary policy, As explained by Gavekal.
“A type cut this week is an easy decision for the Governing Council, as would be another in March,” says Evelyn Herrmann, European Bofa Global Research economist. “After that, things could become more interesting and possibly more controversial,” they sentence from Bank of America.
#ECB #moves #Fed #lowers #interest #rates #fourth #consecutive #time
