The Fed and the ECB prepare to announce, between today and tomorrow, other interest rate hikes, to fight the inflation that still runs. A new close that will result in an additional cooling of the mortgage market ed in new rate adjustments applied on the purchase of new homes. But let’s see what happened and what is expected for the coming months.
Fed: ripe time to slow down to 25 points
The Federal Reserve american, game first, it should start to take a breather and slow the pace of interest rate hikes, which previously carried out at a pace of 75 points at a time.
In this regard, the analysts of Le Francaise AM expect the FOMC raises rates by 25 basis pointsbringing them to a range of 4.50%-4.75%, and that the president Jerome Powell ribadisca the commitment to restore the sprice stability nespite the deceleration in the pace of rate hikes and the commitment to keep rates high until “the job is done” that is, until inflation returns to the 2% target.
For the month of Marchthe probability that the Fed will hike rates again 25 points are “priced” at 80%but analysts believe Powell could also keep the door open for a hold on rate hikes at its March meeting, provided the outlook for both inflation and real economic activity is assessed.
In any case the peak of inflation will be achieved in a range of 5%-5,25% by the end of 2023, according to the latest average forecast by policymakers.
The ECB ready for a high increase of 50 points
Even the ECB meeting could cause few surprises, because there is “a lot of work to do” in Frankfurt to bring inflation back in line with the 2% target.
The Istituto do Frankfurt started with a certain delay compared to its American counterpart and must therefore recover the lost ground. There is also some contrast within the Board between those who would have liked to keep the top gear and continue to raise rates by 75 points at a time and those who favor a deceleration and support a 50-point increase.
Most likely the Eurotower will raise rates by 50 points in both February and Marchgiving a clear indication that this path will continue for a good part of 2023. In her recent comments from Davos, the ECB president Christine Lagarde he reiterated the message from the December press conference, confirming that the central bank will “stay the course”.
Indeed, inflation has fallen below 10% again, but with a rate of 9.2% it still does not allow us to sleep peacefully, while the GDP in the 4th quarter was even better than expected with growth of 0.1% on a quarterly basis and 1.9% on an annual basis. Data that allows you to breathe, but not to rest.
Unlike the Fed, the ECB has not yet given guidance accurate as to what it could be peak interest ratesand, but there has always been talk of a “sufficiently restrictive level to ensure a timely return of inflation to the medium-term objective of 2%”. There is therefore still uncertainty about what the maximum level could be.
The mortgage market in the EU suffers from the restrictive policy
According to a survey conducted by the ECB on the bank lending market, it emerges that at the end of 2022, the Eurozone recorded a substantial tightening of credit standards for all categories of loans and this has led to a decrease in the demand for loans from businesses and to a collapse in the demand for mortgages.
For the first quarter of 2023 the banks of the Euro Area expect a further tightening of credit standards for both home loans and consumer credit. The decline in net demand for housing loans was the sharpest on record, while demand for consumer credit and other loans to households also fell sharply in net terms, albeit to a lesser extent than for home loans. housing construction.
And report on Facie.it reports that, if tomorrow 2 February the ECB were to confirm a new rate increase of 50 pointsi base, la mortgage payment medium variable rate subscribed at the beginning of last year could rise in the coming months by almost 35 euros compared to today. In just over twelve months, therefore, the borrower would find himself paying a heavier monthly installment of 197 euros, i.e. about 43% more compared to the initial one.
The interest rate race may not stophowever, with the February announcement: looking at market expectations (Euribor futures), the experts predict that the 3-month Euribor still grow coming in June 2023 around 3.4%: if the predictions were correct, at the rate of the borrower in question it would reach a good 711 euros255 euros more than the one signed in January 2022.
