2023-11-03 22:18:43
It is one thing that the time for aggressive and constant increases in interest rates is behind us, and quite another thing is that there are going to be decreases in the short term. In fact, the governor of the Bank of Spain (BdE), Pablo Hernández de Cos, He did not outright deny the possibility that the European regulator – of which he is a part – will reduce rates more or less imminently, but almost. ““It is very premature,” he repeated on three occasions, to think about the possibility of future rate cuts.. What’s more, the BdE helmsman believes it is advisable to learn to live with the current interest rates – they are currently at 4.5% – at least for a while. Not in vain, the inflation will not be under control, that is, around 2%, until 2025and this as long as there are no new disturbances, such as a possible escalation of the war between Israel and Hamas in the Gaza Strip to other areas of the Middle East.
Returning the CPI to 2% requires maintaining rates for “a sufficiently long period”, warns De Cos
Hernández de Cos, who held a meeting this Thursday with businessmen from the Canary Islands organized by the Chamber of Commerce of Santa Cruz de Tenerife with the collaboration of CaixaBank, emphasized that bend the curve of the Consumer Price Index (IPC) until returning it to a healthy 2% in 2025 will require maintaining interest rates until then, point up point down, in the current figures. In principle, this should be “sufficient” to achieve the objective of clamping down on runaway inflation from April 2021. So under, let’s say, normal circumstances, the stage of continuous rate increases – there were ten consecutive increases from July 2022 to that the regulator decided last week to maintain the current 4.5% – would already be a thing of the past. The types “are at levels that, maintained for a sufficiently long period, will contribute substantially to restoring the inflation to its 2% target”. And Hernández de Cos said it for the second time: “A sufficiently long period”, which leads almost to 2025 and irremediably to ruling out possible short-term declines. The increases may have ended, at least at the rate at which they were occurring until last week, but in no way is this synonymous with decreases.
More in the medium and even long term, the governor of the Bank of Spain pointed out that the times with interest rates hovering around zero – and even negative – are not going to return. At least not on a horizon that can be glimpsed at the moment. That is, De Cos elaborated, what the market seems to have already taken for granted.
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Regarding economic activity in the Eurozone, the BdE governor explained that growth in the second half of 2023 will be “very weak”, to the point that technical recession cannot be ruled out –two consecutive quarters of GDP contraction–. However, It is also not ruled out, and is even likely to be the case, that the Euro Zone economy will begin to reactivate “from the first part of next year”, to consolidate the recovery towards the end of 2024 and beginning of 2025. If so, if the reactivation starts in the first half of next year, the Canarian economy would clear up part of its own uncertainties in the face of the next summer tourist season and the start of the next winter season. However, we must insist, as in fact Hernández de Cos did several times in his speech to the island business community, that Everything is left to the risk of exogenous factors, especially the latent risk that the war in Gaza will spread to third countries.. Yes, that shock If it were to occur, the scenario, or rather the scenarios – the monetary and the economic one – would have to be reviewed.
Sesé points out, “almost as an obligation”, the goal of bringing the island’s GDP per capita closer to the national average
In his opening speech, the president of the Chamber of Commerce of Santa Cruz de Tenerife, Santiago Sese –who was followed at the lectern by the territorial director of CaixaBank in the Canary Islands, Manuel Afonso–, he emphasized the particularities of a Canary Islands economy with a great challenge ahead, “almost an obligation: that of put an end to the process of relative impoverishment, of distancing GDP per national capita, in which it has been mired for a quarter of a century”.
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