Source: China News Network
Recently, European Central Bank President Lagarde revealed to the outside world that in the context of the current monetary policy facing multiple challenges, the European Central Bank will start raising interest rates in July and is likely to exit the negative interest rate policy before the end of the third quarter. Exiting the negative interest rate policy means that the euro zone will bid farewell to the eight-year negative interest rate era.
Say goodbye to the era of negative interest rates
With the economic recovery slowing and growth prospects bleak, the ECB is facing unprecedented economic pressure this year.
In an article titled "Normalization of Monetary Policy in the Euro Area", Lagarde said that the current environment for monetary policy in the euro area has changed significantly compared with before the epidemic.
On the one hand, supply chain shocks are driving up energy and food prices in the euro zone, and inflation has risen to record highs; on the other hand, weak consumption and investment are also clouding the outlook for economic growth. These complex economic environments have presented new challenges to the ECB's monetary policy.
In order to adapt to changes in the new economic environment, Lagarde said that many people are also calling for new adjustments to the ECB's monetary policy.
In this regard, she said in the article that the European Central Bank is committed to restoring the normalization of monetary policy in the euro area, and is expected to decide the pace of interest rate hikes at the monetary policy meeting held in July this year, and may exit negative interest rates before the end of the third quarter.
Lagarde's remarks have also been affirmed by European officials. Bundesbank President Joachim Nagel said Lagarde's statement was "the right step forward" that would help reduce uncertainty in financial markets.
The driving force behind the interest rate adjustment
If the European Central Bank exits its negative interest rate policy by September, it means that the eight-year era of negative interest rates in the euro zone will come to an end.
The start of quantitative easing in the euro area can be traced back to 2012. In July 2012, the European Central Bank lowered its key interest rate to 0% for the first time, and has since started quantitative easing. Since 2014, the European Central Bank has implemented a negative interest rate policy, and the current interest rate remains at -0.5%. Market analysts said that if interest rates are raised in July this year, it will be the first time the European Central Bank has raised interest rates in more than a decade.
Liu Ying, executive committee member and director of the Cooperative Research Department of the Chongyang Institute for Financial Studies, Renmin University of China, told a reporter from China News Agency that over the past few years, the euro zone has basically maintained a negative interest rate monetary policy and the 2007 US financial crisis has brought huge losses to the European economy in 2009. The shock has not been completely shaken off.
She pointed out that after the outbreak of the US financial crisis, Europe immediately faced a severe sovereign debt crisis and the overall economy fell into weakness. After the European Central Bank lowered the interest rate to zero, in order to get out of the shadow of the European debt crisis as soon as possible under the circumstance that the conventional low interest rate methods still do not play a significant role, the European Central Bank can only seek "unconventional" monetary policy measures, that is, negative interest rates. way to further stimulate economic growth.
However, the "unconventional" monetary policy of the European Central Bank is obviously out of date. Since March this year, affected by the crisis in Russia and Ukraine, the inflation level in the euro zone has been rising, putting the ECB under enormous pressure. Inflation in the euro zone surged to 7.5 percent in March, the biggest gain on record for the euro, according to Eurostat.
Joachim Nagel said that the current high level of inflation in Europe needs to be dealt with by raising interest rates, which is already a consensus within the European Central Bank.
French central bank governor Villeroy also said that the current rise in inflation in the euro zone has almost far exceeded the inflation warning line expected by the European Central Bank, and the European Central Bank must give priority to high inflation in the short term, "This is why we must make monetary policy normal. the reason for the change”.
What does it mean to say goodbye to the era of negative interest rates?
From the outside, the ECB's monetary policy tightening is already on the horizon.
European analysts pointed out that the European Central Bank is expected to raise interest rates by 25 basis points in July, September and December. Dutch central bank governor Nott also said that he supports raising interest rates by 25 basis points in July, but if inflation data deteriorates, the European Central Bank may take more aggressive interest rate hikes.
In Liu Ying's view, the ECB is expected to withdraw from negative interest rates by September this year, which is a forced move under the pressure of the internal and external environment. From the perspective of the external environment, the Federal Reserve has recently raised interest rates rapidly and sharply, which has intensified the return of the dollar and put pressure on the euro; on the other hand, the internal inflation level in the euro zone has risen to a record high, and interest rate hikes should also be taken.
In response to the impact of the ECB ending the era of negative interest rates, Liu Ying believes that each has its own advantages and disadvantages. On the one hand, withdrawing from negative interest rates will help ease the pressure on the European Central Bank to deal with inflation, and at the same time will help maintain the stability of the euro's exchange rate, enhance the euro's attractiveness to capital, and stabilize the development of the financial market.
But on the other hand, there are also many "side effects", and the "troika" of the economy - investment, consumption and exports will all be affected.
Liu Ying pointed out that in terms of consumption, the European economy is mainly driven by consumption in the service industry, and consumption will be suppressed after interest rates rise; in terms of investment, interest rates will rise, social financing costs will further increase, and enterprises will be less motivated to invest; The strengthening of the euro due to interest rates will dampen future export growth in the region.
Economic pressure is high, the euro zone wants to end the eight-year era of negative interest rates
Date:2022-06-01 Hits:125
