When will Croatian loan interest rates start to rise?
February 6, 2022 – Regarding the question on many lips as to precisely when Croatian loan interest rates might rise again, the European Central Bank recently announced that its key interest rates should remain at their current minimum levels , despite record high inflation currently occurring across the Eurozone.
As Poslovny Dnevnik written, however, inflation, which was considered temporary by everyone last year, is obviously “overflowing” this year as well, so much so that it exceeded 5% in the euro zone in January.
However, this decision by the ECB not to start with a significant tightening of its monetary policy was expected, given that ECB President Christine Lagarde has previously stressed that there should be no rush and that there is no would not increase any key rate before the year 2023.
Some analysts are already questioning the ECB’s assessment as it is evident that inflation is rising much faster than their previous forecasts claimed, and they believe the ECB itself is also underestimating this very real risk.
That said, even if there has been a shift in perspective, one can hardly expect a sudden shift in the narrative, as even that acknowledgment alone could be counterproductive. Recently it has been indicated that key interest rates, including those attached to Croatian loans, are not expected to rise (it all depends on continued inflation), but of course the door has been left open for that happen next year. However, the ECB remains on the path of reducing bond redemptions above all else.
The ECB also said in a statement that the Governing Council would suspend the net purchase of assets under the Pandemic Emergency Purchase Program (PEPP) at the end of March this year. As for the asset purchase program (APP), it will be gradually reduced, and it is expected that “the net purchases will be completed just before the key ECB rates start to rise”.
The ECB is therefore once again behind the central banks when it comes to changing monetary policy. The US Federal Reserve has announced recent key rate hikes, several times this year, and the Bank of England (BoE) also raised its key rate just a few days ago.
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