The increase in interest rates also means more expensive money, which will also affect the cost of borrowing for countries.
By Chrysostomos Tsoufis
After the dizzying values in energy and increasing accuracy on the shelf, the “evil triton” for thousands of borrowers. The ECB joins the clubs of the other central banks and after 11 whole years will raise interest rates.
According to ECB chief Christine Lagarde, one is expected increase of 25 basis points in July and another in Septemberthe amount of which will largely depend on the course of inflation.
As the ECB raises interest rates, thousands of loans will be affected floating interest rate, linked to the euribor that follows the course of the Central Bank interest rate. Somehow, for a mortgage loan for example 100,000 euros for a period of 20 years with an interest rate of 3%, whose monthly installment amounts to 555 euros, will have an increase of 12 euros to 567 euros, after the increase in July by 0.25% from Frankfurt.
An increase in interest rates means less and more expensive money, which will fatally affect the cost of borrowing for countries. At a time when Christine Lagarde was on the podium explaining the end of the era of negative interest rates, the Greek 10-year bond was rising to a 3-year high. At the age of 8 he was found in the 10 years of Germany and France and Italy. However, the ECB’s commitment to support Greece, which does not yet have an investment grade, is very important, even with the creation of new financial instruments if market conditions prevail.
What … frightened or rather frightened Frankfurt is the dynamics of inflation. The ECB was forced to revise its estimates by raising the bar to 6.8% this year in the Eurozone to fall to 3.5% in 2023 and 2.1% in 2024. In other words, it will take 2.5 years to achieve its goal ECB and to reduce inflation to 2% as “protected” by its statute. Embarrassed Christine Lagarde He explained in the press conference that out of the 100 indicators monitored by the Bank’s economists to assess the course of inflation, 75 are above the 2% target, which is unprecedented.
In Frankfurt, however, they are preparing for even the most dystopian scenarios. In the negative scenario Inflation this year jumps to 8% and remains more than three times the target, at 6.4% in 2023 before falling to 1.9% in 2024.
Exercises are also done for course of energy prices which are also the big unbalanced factor.
In the negative scenario the average price of oil this year exceeds $ 130 / barrel and $ 140 in 2023. In Extreme scenario black gold exceeds $ 140 this year and is a breath away from $ 180 in 2023.
For natural gas, the unfavorable scenario predicts prices just over 180 euros / Mwh this year and next. In the unfavorable, the natural gas reaches 220 € this year and 250 € in 2023.
