The ECB will raise rates, despite the bad data
In three days, the ECB will meet to decide whether to apply a further increase in interest rates. If he were to follow the expected economic trend for the eurozone, the one shown by the PMI index, he would make a careful assessment and think about it for two minutes. Today's PMI forecast data was negative, lower than expected.
The HCOB Eurozone Composite PMI fell to 48.9 in July 2023, down from 49.9 the previous month and well below market expectations of 49.7, according to a preliminary estimate. The latest reading indicated the steepest pace of contraction in corporate output since last November, as new business inflows fell the most in eight months and backorders fell at the fastest rate since February 2013, excluding the early months of the COVID-19 lockdown. Furthermore, employment growth slowed to the weakest level since February 2021. Price pressures also eased further, with average selling prices rising at the slowest pace in almost two and a half years. Finally, business confidence fell to its lowest level since last November.
The manufacturing PMI would be even worse, with a negative value below 50 for several months now. Yet all this will not stop the ECB which, in four days' time, also according to IMF forecasts, will raise interest rates again, almost certainly by a quarter of a point.
We are now at 4% and this has led to a sharp increase in interest rates for mortgages in the euro area. Just note the trend of the Euribor
Which in turn will make itself felt on the installments, which grow very sensitively
None of this will stop the ECB, it will go ahead, in fact consider ourselves lucky if the increase is not 50 basis points, 0.5%. Probably the protests of various countries, from Italy to France to Spain, will push for a limited increase of 0.25%, but this increase will still exist.
And we will pay the consequences
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The article The ECB will raise rates, despite the bad data comes from Scenari Economics .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-bce-aumentera-i-tassi-nonostante-i-dati-pessimi/ on Mon, 24 Jul 2023 16:37:11 +0000.