Exactly one year ago, the ECB made a decision it hadn’t made in 11 years: raising interest rates to address inflation, which was above 10% at the time. Since then, the consequences have been numerous and far-reaching.
Exactly one year ago today, the European Central Bank made a decision it hadn’t made in 11 years: raise interest rates to tackle inflation caused by the war in Ukraine. What started as a “shy” rise of half a point eventually reached 4% after eight meetings of the ECB, in which all meetings decided to further increase the price of money.
The goal and main task of the ECB is to keep inflation below 2% and in July 2022 it stood at 10.8% in Spain and 8.9% in Europe. Faced with this situation, plus the fact that the US Federal Reserve and the Bank of England had already taken their first steps against inflation, the institution led by Christine Lagarde decided to take the path of rising money prices.
The effects of the increase have been important, especially for citizens’ purchasing power, and as we published on eitb.eus at the end of June, the Euribor has risen above 4% for the first time since autumn 2008, driving the average mortgage more expensive €340 per month compared to two years ago.
Today, without going any further, the INE has released new mortgage signing data for May, with a whopping 24% drop, the biggest drop in two and a half years. With the new decline in May, which is stronger than in previous months, the take out of new mortgages for the purchase of a home has fallen for four consecutive months.
Financing is therefore much more expensive for individuals who want to buy a home, for those who already pay for it, but also for companies, whether with loans, credits, guarantees, promissory notes or bonds.
Cepyme, the Spanish confederation of small and medium-sized enterprises, warned this Friday that corporate data points to a “worrying slowdown” in activity and has warned that this situation will continue to worsen in the coming months due to the ECB’s monetary policy.
Spending has also suffered as household spending is expected to grow 2.1% this year, compared to 4.4% last year, all of which are a direct result of the rise in CPI and interest rates, according to CaixaBank Research . continue to do so until markets stabilize.
The next ECB meeting is on July 27, when the upward trend is expected to continue. According to what Lagarde said on June 15 after the latest hike, she considers it “likely” that the institution will raise rates again in July. ‘Has the journey ended? No. We haven’t reached our destination yet.’
Experts do speak of a possible trend reversal from the autumn (the ECB for until September 14), taking into account the previously implemented increases and the moderation of inflation in Europe as a whole.
Source: EITB
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
