“It is very likely that this will be the peak, unless there is an unexpected rise in inflation, strong economic growth (unlikely at the moment) which would prompt the European Central Bank to raise rates further of guiding interest.” I think the probability of such a scenario is less than 10 percent,” Swedbank chief economist Nerijus Mačiulis commented to The Postedia on Friday.
The European Central Bank (ECB) on Thursday raised all its key interest rates by 25 basis points, and they will reach 4 to 4.75% from September 20.
6 month duration Euribor, as of September 14, reached 4.040 percent, the previous value was 3.999 percent:
Economist: markets hope that key rates will not increase
N. Mačiulis explains that the latest value of this “Euribor” does not constitute a radical change: it actually includes Thursday’s decision of the ECB and the additional expectation of the market that the base interest rate will not increase not again.
“6 months Euribor depends not only on the interest rates currently set by the European Central Bank, but also on the interest rates expected by the market in the next 6 months. It is precisely these 4 percent. and that means that the average base interest rates set by the European Central Bank should reach 4 percent, i.e. remain at the current level”, explains the chief economist of Swedbank.
He said the likelihood of base interest rates rising is low.
“A much more likely scenario is that early next year the market will expect the European Central Bank to cut interest rates and Euribor will immediately start to fall, as it will not start to fall when the European Central Bank The bank is already reducing interest rates, but when and when the markets expect the base interest rates to change in the corresponding six months”, says the expert.
According to Groupe SEB, the ECB is signaling that interest rates are high enough to control inflation.
“And that could mean the interest rate hike could be the last.” It is also worth noting that the ECB has significantly reduced its GDP growth forecast and slightly lowered its inflation forecast,” the group said in a statement on Friday.
According to the group, following this news, yields on most government bonds fell and optimism prevailed in stock markets.
Citadele economist Aleksandar Izgorodin said after the ECB’s latest decision that interest rates in the eurozone should be “expected to remain at a high level for some time to come.” On the other hand, for depositors, this means a longer and higher return,” explains the economist on the social network.
Euribor suggests waiting for next year’s cut
Asked about the development of the situation of Lithuanian borrowers, economist N. Mačiulis replies that there are no real changes due to the new meaning of Euribor.
“Euribor expectations for 3- and 6-month rates were already almost fully priced in.” (loans – editor’s note) interest rates, there are no dramatic changes here. Probably on the contrary, yesterday’s meeting of the Governing Council of the European Central Bank made it very clear that a considerable number of its members no longer want higher interest rates and a clear signal was sent that it This is the last rise in interest rates,” says N. Mačiulis.
According to him, the debate now focuses on how long these interest rates should be maintained at their current levels to reduce inflation.
“The market expects base interest rates to remain at this level for almost a year. According to our assessment (from Swedbank – editor’s note), it will be shorter and base interest rates will probably be lowered for the first time in spring,” says N. Mačiulis.
“The Postedia” has already published Eurostat data according to which the price of housing loans in Lithuania is one of the highest in the Eurozone (it is higher only in Latvia). It is true that only April data is provided so far.
The infographic shows the countries where housing loans are the most expensive, according to Eurostat:
As reported on Thursday, the interest rates for using the deposit facility, main refinancing operations and marginal borrowings were increased to 4.00% and 4.50%, respectively. and 4.75 percent.
The head of the ECB, Christine Lagarde, explained at the press conference what the forecast for interest rates in the Eurozone is, emphasizing two aspects: the sufficiently effective level of interest rates and the duration.
“It is likely that there will be more emphasis on duration, but that does not mean that we have already reached the peak – we cannot say that,” said Ch. Lagarde on the level of base tariffs.
The euro zone regulator raised key rates for the tenth consecutive time in a bid to bring euro zone inflation back to its medium-term target of 2 percent. The ECB forecasts that price growth in the euro zone will reach 5.6% this year, 3.2% next year and 2.1% in 2025.
According to Eurostat, the currency bloc’s annual inflation (in August compared to last August) reached 5.3 percent.
Source: The Delfi