The ECB is far from stopping interest rate hikes

The ECB will continue to raise interest rates for the foreseeable future and does not appear to plan to stop in the short term. ECB President Christine Lagarde said yesterday at the WEF. According to economist Edin Mujagic, the news should be seen as a warning to financial markets.

After all, according to Mujajic, markets think differently every now and then. “Markets are insisting that rate hikes will soon be a thing of the past,” he says. But yesterday Lagarde said he was calling on markets to review their positions. Translated into plain Dutch, he says markets should be warned to adjust their expectations, otherwise they will get wet. The ECB will continue to raise interest rates.’

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And the pace of interest rate hikes is unlikely to change. Markets prefer to talk about a rate cut of 25 basis points, according to Mujajic, while Lagarde is sticking with 50 basis points. ‘The first increase will be implemented on February 2nd, and the fifty will be implemented in March.’

The increase is constant

According to Mujagic, the ECB is certain to raise interest rates in February and March, but what happens after that seems still open. “But if you look further, you see inflation and economic growth falling further and further,” he says. ‘They are the reason why the ECB will take it easy after March.’

In addition, according to Mujagic, there is an additional effect from the United States. The ECB’s sister, the central bank, is already slowing down. So they will stop raising interest rates in a few months,’ he continues. “You have to look at these two central banks as two vehicles driving down a road, the central bank leading the way. If the central bank puts on the brakes, the ECB will follow. Otherwise you’re doomed,” he said.

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Mujakic wants to look to the past for this. “The ECB always follows what the central bank is doing. And the interest rate differential between the two central banks is usually two percentage points. So if you see now that the central bank wants to raise interest rates by four to five percent, you can say the ECB will raise interest rates by two to three percent. .