Central banks around the world have started raising their reference interest rates to stem growth Inflation which began to be felt as early as 2022 and increased with the war in Ukraine. Thus the end of the age was announced Cheapest loan But sometimes it may not be like that. The International Monetary Fund (IMF) believes that once inflation is under control, central banks should return interest rates to pre-pandemic levels. In the case of the Eurozone, this means that the European Central Bank (ECB) can reduce the refinancing rate until it reaches 0%, which was in 2019.
today Inflation Already there are signs of decline in many countries around the world. In the euro zone, too, it has been falling for several months, settling at 8.5% in February. But, according to the ECB president, “It is assumed that Inflation Stay too high for too long.” For this reason, the ECB and other central banks are committed to raising key interest rates Inflation Down to 2%, the level at which price stability is ensured.
At this point, the IMF believes that “recent increases Real interest rate likely to be temporary.” This is because “when inflation is back under control, central banks in advanced economies should ease monetary policy. interest rate Real consumption returns to pre-pandemic levels”, he explains April World Economic Outlook.
This means that central banks will again interest rate In this case close to 0% BCE Which in 2019 (before the pandemic) had the following rates:
- Principal interest rate Refinancing operationso was 0% (today it is 3.5%);
- Fees apply for permanent facilities deposit It was -0.5% (today it is 3%);
- Fees apply for permanent facilities Liquidity provisions It was 0.25% (today it is 3.75%);
It is important to note that when the ECB cuts interest rates again, EURIBOR rate Also should be downloaded. It remains to be seen whether they will settle to pre-pandemic levels, where they were in negative territory.
In any case, the IMF admits that Decrease in interest rates The central banks’ reference will depend on various factors, such as the persistence of high levels of public debt, which may lead to lower interest rates, but at higher levels than before the pandemic. For emerging economies – such as China, India and Brazil – due to demographic and productivity trends, the IMF predicts a convergence over time with lower levels of “natural” interest rates in advanced economies.
How will inflation evolve in 2023? And in 2024?
response to central bank Depending on its evolution Inflation In different economies (among other economic factors). According to the World Economic Forecast published by the IMF, Global inflation should decrease by 7% in 2023 (4.9% in 2014), thus assuming a slower-than-expected decline. Core inflation is likely to decline more slowly.
Already Eurozone, Inflation will fall to 5.3% this year and 2.9% in 2024, the IMF forecasts. Within the European Space Economy, the IMF predicts a Inflation Rate:
- 6.2% this year in Germany (3.1% in 2024);
- 5% this year in France (2.5% in 2024);
- 5.7% this year in Portugal (3.1% in 2024);
- 4.5% this year in Italy (2.6% in 2024);
- 4.3% in Spain in 2023 (3.2% in 2024).
To update the global economic forecast, the institute headed by Kristalina Georgieva noted that Global inflation Falling slowly economic growtho Historically low and increased financial risk. This is because the impact of the 2022 shocks is still being felt and now, the economy is dealing with recent times Turmoil in the banking system.
“The tightening of recent fiscal conditions is also hampering the economic recovery”
As a result of this economic context, the IMF considers that it is “likely” that many economies will register slower growth. Income in 2023When witnessing growth unemployment
Among advanced economies, the IMF has improved, however, the forecast for US economy, For which it forecasts gross domestic product (GDP) expansion of 1.6% this year and 1.1% in 2024. Euro zone indicates a economic growth 0.8% this year and 1.4% in 2024. For Japan, it points to growth of 1.3% this year and 1% in 2024.
This holds true in emerging markets and developing economies China 5.2% this year and 4.5% in 2024, when it is revised downwards India 5.9% in 2023 and 6.3% in 2024.
The IMF has acknowledged the instability in the markets due to the instability in the banking sector
The implications for the IMF are growing rapidly interest rate As weaknesses emerge, Banking sector became a focus and fears of contagion increased in the financial sector, including non-bank financial institutions.
“O The global financial system Proving considerable excitement as growth interest rate Undermining the confidence of several institutions”, warned Tobias Adrian, IMF Chief Economist responsible for the financial and banking sector, “Historically these strong increases in central bank rates lead to tensions that reveal failure. banking system” and that was precisely what was behind its bankruptcy Silicon Valley And the signature bank, in the United States, and serious difficulties that swiss credit, Already bought by a bank Swiss UBS. This situation has created anxiety in the market today Banking instabilityThe IMF admits.
The good news is that policy makers have “taken drastic action Stabilizing the banking systemO”. Furthermore, “the banking system has more capital and funding to withstand adverse shocks, off-balance sheet entities have been phased out, and credit risks have been limited by post-crisis regulations. [de 2008] Strict”, highlights the IMF.
The institute recommends that, “more than ever”, policy makers need to communicate clearly, considering that Budget policy It must play an active role, namely to create a financial cushion through consolidation.
On the other hand, he argues that, “incl financial instabilityshould focus on monetary policy Reduce inflationbut ready to adjust quickly to financial developments” and that regulators and supervisors must strengthen oversight and proactively manage market tensions to prevent vulnerabilities from worsening.
* With Lusa