Vice-President of the European Central Bank (ECB) Luis de Guindos stated on Thursday that “we should expect interest rates to rise at this rate for some time.”
The indication for Q4 2022 is that we are in negative territory, but not particularly deep, with GDP contracting by 0.2%.
Inflation will remain around its present level for the next two or three months, before falling to around 7% by the middle of the year in q2 2023. We have no choice but to take action.
If nothing is done, the situation will worsen because inflation is one of the causes of the current recession. In the short term, increases of 50 basis points may become the new norm.
Our interest rates will then become more restrictive. I am concerned that markets may underestimate inflation’s endurance.
I am concerned that markets will regard fiscal policy as irreconcilable.
