2023-06-15 19:36:52
Unlike the US Fed, the European Central Bank (ECB) is not pausing in raising its interest rates. “We haven’t started talking about it and haven’t started thinking about it”, asserts Christine Lagarde, its president, so that it is very clear. Worried about the persistence of inflation, the monetary institution announced, Thursday, June 15, a new increase in its interest rates by 0.25 point, to 3.50% for the deposit rate, as well as a rise ” very probable “ at its next meeting in July.
“Are we done? No. We have not arrived at our final destination. Is there still a long way to go? Yes “explains Ms. Lagarde.
The financial markets had anticipated such a message and hardly reacted. “I am convinced that the July increase will not be the last”, predicts Mabrouk Chetouane, strategist at Natixis. He is betting on an interest rate that will rise at least twice more, and perhaps four times, or a deposit rate that will eventually reach between 4% and 4.5%. Marchel Alexandrovich of Saltmarch Economics Research agrees: “It would take a very significant surprise drop in inflation over the next three months to avoid a rise. [à la réunion de septembre]. » The ECB is therefore not done with the fastest monetary tightening since its creation in 1998.
More tenacious than expected
Behind this action is inflation that is proving to be more persistent than expected. Admittedly, the rise in prices has fallen sharply in recent months, falling from a peak of 10.1% in November to 6.1% in May. But for the moment this is essentially a mechanical effect, which reflects the fall in gas and electricity prices from their peak in 2022. Other signals worry the ECB, starting with the rise salaries.
“To put it simply, it is first of all the energy [qui a provoqué l’inflation], then it moved on to food prices, and now the labor market and wages play an important role”, explains Ms. Lagarde. On average, wages in the euro zone increased by 5.3%, about double the usual average. If this is good news for employees, it is a problem for the ECB, since it maintains the rise in prices.
In this context, the ECB expects inflation to average 5.4% this year, 3% in 2024 and 2.2% in 2025. This is above its official target of 2% for the next three years. “We are not satisfied with this forecast”recognizes Ms. Lagarde.
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