An important meeting will be held on Thursday at the European Central Bank. The ECB must normally lower its rates by a quarter of a point, which was eagerly awaited since inflation was controlled below 2.5%.
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Barring any drama, the ECB institution should lower its interest rates by a quarter of a point from Thursday June 6. They should go from 4 to 3.75%. And this little quarter of a point actually marks a real shift, a change in policy after months of high interest rates to fight inflation.
Since the summer of 2022, the European Central Bank has carried out the strongest tightening in its history: interest rates have gone from negative levels, -0.5%, to 4%! To stop the rise in prices, the ECB made money more expensive, so to speak.
Today, inflation is contained. After soaring to more than 10% with the war in Ukraine, inflation fell to just over 2.5% year-on-year this spring. However, this was the ECB’s objective: to reduce the price increase to around 2%.
For the French, this will loosen the credit floodgates a notch, particularly real estate credit. Certainly, the drop in rates has already started a little, but this promises to be a real signal for the banks. Households will be able to borrow “cheaper”, in a context where real estate prices have started to decline. Sales should therefore pick up.
This is also good news for businesses. With high interest rates, they slowed down their investments, whether to buy machines or launch new projects. There, they will find room for maneuver.
The objective is to boost the economy. It must be said that, this last year, loans to businesses increased by barely 0.4%, for households it was 0.2%. Needless to say, we were almost at a standstill. One of the main criticisms addressed to the ECB is to restrict, to stifle the economy of the euro zone, at a time when, on the contrary, companies need liquidity to finance the ecological transition, to take the turn of artificial intelligence… Especially since at the same time, in the United States, businesses have benefited from much more favorable borrowing conditions for several months. Which accentuates the dropout.
Finally, this ECB rate cut is all the more expected as the financial markets are already banking on the fact that it will be followed by other cuts by the end of the year.