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“The ECB will raise its rates faster than expected! »Editorial by Carlo SANNAT

My darling impertinent, dear impertinent,

According to Reuters, (source here) “European Central Bank (ECB) officials are ready to end its asset purchase program as soon as possible and raise interest rates as early as July,” nine sources told Reuters.

The ECB remains one of the most cautious central banks in the world as many of them, including the US Federal Reserve (Fed) and the Bank of England, have already begun to raise rates in an effort to stem the surge in prices.

Since 2014, it has purchased almost 5 trillion euros of public and private debt as part of its “quantitative easing” strategy aimed at supporting credit but also at relaunching inflation, which has long been below the target of 2% per annum.

But the situation has changed in recent months since the surge in energy prices and many commodities brought inflation in the euro area to 7.5%, a level unprecedented in the history of the single currency.

The ECB was slow to admit that this inflationary surge was not only temporary, but must now respond to fears of a prolonged anchoring of inflation, also expressed by some members of the Council.

“In my opinion, all the criteria for raising interest rates are now met,” said one of the sources for Reuters, who spoke on condition of anonymity.

Some Governing Council members criticize the ECB for underestimating the level of inflation and believe the new projections are a step towards a return to reality.

“When (chief economist) Philip Lane presented the figures, some applauded,” another Reuters source said.

Without going to the point of mentioning a rate hike this summer, ECB President Christine Lagarde said on Friday that the monetary institution is expected to end its bond buying program starting in the third quarter and raise the rate by the end of the year. ‘year.

Almost all sources predict at least two rate hikes this year and some even think that a third could occur before December 31st ”.

We learn several things in this short dispatch.

The first is that the ECB has bought over € 5 trillion of public debt since 2014!

5 trillion! This is obviously remarkable and allows us to officially understand that public debts are not bought by markets and private investors, as happens in a normal economy and allows to give real value to money and therefore to avoid the unhealthy inflation linked to excessive creation. monetary. This is because the ECB is buying state debt, rates remain low and states can continue to borrow more and more, which is cheap!

The second thing is that the ECB will very quickly stop buying the debt of European states. It will therefore be necessary from the next few months that we finance ourselves. On the stairs. And it is not easy with zero rates, suddenly the rates rise and rise to attract the customer and the investor who will have to choose between financing France, Germany, Italy or Greece … and this will certainly not be done in the same way Vote !

The third is that the European Central Bank will gradually raise rates, but once again faster than expected.

Let me tell you, we are in a bad situation between the rate hike, the end of the ECB’s purchases of public debt, the war in Ukraine, inflation, Covid and restrictions in China, not to mention the cost of energy, is a policy that will lead us directly towards a recession and a major economic crisis of the 2008/2009 type at best.

It is already too late, but all is not lost.

Prepare yourself!

Carlo SANNAT

“Insolentiae” means “impertinence” in Latin
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