European Central Bank, Interest Rate Hike
ECB's Last Meeting of the Year: Is an Interest Rate Hike Imminent?
As the last meeting of the year for central banks approaches, there is speculation that interest rates in major economies around the world may continue to rise. The European Central Bank (ECB) is set to hold its final meeting on December 15th, and many are wondering whether ECB President Christine Lagarde will report another 50 basis point increase due to Europe's high inflation rates and energy situation.
Current Reference Rates in Europe
Currently, reference rates in Europe are at 2%, with the deposit facility rate at 1.5%. While it is expected that rates will continue to increase in early 2023, the ECB may not be as restrictive as it has been in the past. This shift is based on the evolution of prices in Europe, with the euro zone's November CPI falling to 10% from 10.6% the previous month.
Possibility of Higher Reference Interest Rates
Despite this, ECB members have hinted that they may moderate their tone moving forward. However, there is still a possibility that a higher reference interest rate may be reached than the one currently in use. Edmond de Rothschild suggests that the inflation peak may be reached in 2022 due to the fall in energy prices. The market currently assumes that the maximum rate will be reached by March 2023, with the deposit facility rate at 2.75%. However, it is not expected that interest rates will go down once this maximum is reached.
Impact on Businesses and Consumers
It is important to note that these decisions made by the ECB will affect businesses and consumers alike, as they will have an impact on borrowing costs and economic activity. The uncertainty surrounding these decisions makes it essential for businesses to remain informed and prepared for any changes that may arise.
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