European and American central banks remain cautious and prefer to maintain high rates

As inflation is falling in both Europe and the United States, the European and American central banks have decided not to lower interest rates. This excess of caution is starting to weigh on states and households, but could find a favorable outcome in 2024.

Despite inflation falling in Europe, as in the United States, and despite strong pressure from business circles, central banks decide not to lower interest rates, which remain at a high level. These are the decisions taken by both the ECB, the European Central Bank and the American Federal Reserve.

This choice is explained because central bankers, the “doctors” of the moment, keep their patients under surveillance in case they have a relapse. Their patients are Europe on one side, the United States on the other.

The Europeans are waiting for the American start

In Europe, despite the sharp decline in inflation, the President of the European Central Bank, Christine Lagarde, declared that“we must not let our guard down”. We don’t know if this is a deliberate play on words to lighten the mood. In the United States, his counterpart, Jérôme Powell, president of the American central bank, the Fed, made the same decision: we are not touching monetary policy for the moment. But, unlike Christine Lagarde, he opens the door to an easing of rates in the coming months.

The chairman of the American Federal Reserve notes that inflation has fallen since its peak, without a significant increase in unemployment. But, he adds, this inflation remains “too high” and the path is “uncertain”. Economists still see a signal in Mr. Powell’s speech, whose words are weighed one by one. Analysts draw the conclusion that 2024 will be the year in which the rate cut begins and it is the United States which will give the “the lead”, as always. Hence the ultra-cautious position of the President of the ECB, Christine Lagarde, who will not take the decision to lower interest rates in Europe without an American lead. She also recognized that the subject had not even been discussed on Thursday in Frankfurt.

A hope for 2024

All this may seem extremely distant, but in reality, it is very concrete and these interest rates are starting to cost us dearly. First for the debt of sovereign states. Contrary to the reassuring speech of certain political decision-makers, the repayment of our public debts is clearly becoming more difficult. And then, for households and individuals, it is not yet the time for a reduction in credits for investing in real estate. Big problem, we have to wait a little longer. So let’s bet that 2024 will be the year of relaxation that would suit everyone.

According to INSEE, the growth rate of the French economy should reach +0.2% growth, at the start of 2024. And this forecast should allow France to avoid recession, after the drop in GDP which weighs down the third quarter of 2023. Small volume but positive impact, just to end the week with a good news.