First voices, first cracks. Something is moving on the board of the European Central Bank (ECB). Yesterday, the ECB unanimously decided to leave interest rates unchanged in the current range of 4%-4.75%, which remains the historical high since the birth of the euro. Important: the meeting did not discuss lowering interest rates. President Christine Lagarde said that "we have not yet reached" that point. He acknowledged that "they don't feel safe".
But... yes, there is a but. Or a nuance: the organization has begun to discuss "how to put an end to the current restrictive cycle of monetary policy". In a word, to debate when. The future calendar. Therefore, they hope to have more data, which will be available, due to the whim of the statistical calendar, in June.
The stock markets took this downward prospect seriously before the summer. The Eurostoxx 600 index rose more than 1% and reached an all-time high. The Ibex climbed to the highest since 2018.
And the fact that yesterday the ECB had more than one reason to move forward or at least formally discuss a cut. Because inflation is decelerating more than expected. According to the latest forecasts of this body, price growth in the Eurozone will mark 2.3% in 2024 (from 2.7% previously), 2% in 2025 (from 2.1%) and l '1.9% in 2026.
Not only that: economic growth is also not going as well as before and it could use some monetary oxygen. "The economy is weak", admitted Lagarde. The ECB revised down its growth estimates for 2024, to 0.6% (from 0.8% in December). Activity is expected to remain moderate in the short term, then grow by 1.5% in 2025 and 1.6% in 2026.
In both cases, these two arguments have not been enough for the ECB to change course. Frankfurt opted for the fourth pause in a row after ten consecutive increases in the price of the money since July 2022. So why is Lagarde hanging on?
"Although most indicators of core inflation have continued to decline, domestic inflationary pressures remain intense, partly due to strong wage growth," the ECB said in its note.
Lagarde herself gave more details. It continues to closely monitor the evolution of the price of services, which is the component most closely linked to consumption, purchasing power and salaries. Although the wage increase is far from the maximum, the ECB wants to ensure that there will be no possibility of spirals or so-called second-round effects emerging again.
To this must be added the weight of statistics and history, which always influence a decision. As noted by Sylvain Broyer, chief economist for Europe at S
In any case, the immobility of the ECB, despite the weakness of these macroeconomic data, has created more than one surprise. "It is striking to us that there was not even a first cut in interest rates on the table at this March meeting, when manufacturing activity is retreating, the growth of countries is stagnant or in recession and the risks in the real estate sector".
"However - he opines - they do not want to go down in history having cut interest rates and having to raise them again given the current risks, mainly on a geopolitical scale", Manuel Pinto wrote yesterday in a note, head of analysis at XTB.
Given the prospect of rate cuts in the coming months, is it better to wait before taking out a mortgage? "The difference between how much more the house will cost you at the end of the year compared to what you can save on the mortgage if you wait is not significant, so I think that if you find it, it's worth buying." says Paco Campos, professional in the real estate sector, founding partner of We Rent.
"Another thing is the institutional market, where the high cost of money does make investment difficult. That's why some real estate developments could be stopped", he warns. "You have to think that the profitability of Treasury bills is about 3.5%, so the profitability of a real estate business must be much higher than this figure; otherwise, it's not worth it."
