The Central Bank of Europe (ECB) announced the 75 basis points of raising interest rates. This is also the largest increase of interest rate hikes at the European Central Bank’s 25 members at a single monetary policy conference. The European Central Bank stated in a statement that this year may increase interest rates.
The main purpose of the EU’s strong “interest rate hike” is of course to inhibit inflation. The inflation rate in the euro zone rose to 9.1%in August, and was influenced by Russia’s announcement of stop supplying natural gas indefinitely. It is expected that it will move towards 10%in the next few months. Inflation directly affects the quality of life of ordinary people. In popular terms, the monthly income of an ordinary family can buy 1,000 bread, and now it may only buy 900. The amplitude. The decline in the quality of life of ordinary people directly affects their evaluation of the government, thereby affecting the votes of the ruling party of various countries. Therefore, suppressing inflation and ensuring the quality of life of the people is the top priority of government work.
The second “pusher” behind the European Union is the “good ally” in Europe -the United States. Since the global inflation crisis, the United States is the country with the largest interest rate hike. The value of the Federal Reserve has led to the continuous rise in the US dollar, and the euro has been depreciating accordingly. This has caused two serious problems. First, a large amount of funds in Europe have continued to flow to the US market, especially in the field of currency investment. The reason is well understood. Just like the stock market, the value of the euro has continued to fall, the value of the US dollar is rising, and investors will definitely chase and fall. Second, because the vast majority of global crude oil trading is settled in the US dollar, the euro exchange rate against the US dollar continues to fall, which means that the euro zone countries need to pay more money when buying crude oil. more serious.
The “interest -raising” measure can indeed effectively suppress inflation, but at the same time it will suppress market investment and consumption behavior. Investors will reduce production and investment correspondingly because of higher borrowing interest rates. Consumers will tend to deposit more mobile funds into banks because of higher deposit interest rates in bank deposits and reduce consumption. As we all know, money can only create value and promote economic growth. Some analysts pointed out that the weakening of the euro liquidity will inevitably have a huge negative impact on the euro zone’s weak economy. Relevant departments have significantly reduced the economic growth expectations of the European Union for the rest of this year and the entire 2023 EU. It is expected to grow 3.1%in 2022, 0.9%in 2023, and 1.9%in 2024.
Post time: Sep-13-2022