Were you surprised by the decision?
“Not at all. When inflation rose in 2022 due to higher gas and oil prices, the ECB waited a long time before raising interest rates. It believed that high inflation would only be a temporary phenomenon. It received a lot of criticism for this at the time. That is why it fears Now they are cutting interest rates very quickly. They first want to be absolutely sure that inflation has fallen enough, even if there is a clear downward trend.
“You should know that interest rates are an important economic tool. High interest rates, as we know them now, mean that it is not easy for businesses to get loans and they become more expensive. It is also becoming more expensive for consumers to get credit to buy a car or a house.” “For example. The result is that consumers consume less and businesses invest less, leading to lower economic demand. As a result, prices will rise less quickly and will eventually fall.”
Inflation is falling. Next year, the European Central Bank expects the inflation rate to reach 2%, which is the ideal level. Are we now gradually returning to a normal economic situation?
“I don't have a crystal ball. No one can predict what will happen in the world. But apart from that, the situation is starting to return to normal. It seems unlikely to me that we will have to wait until next year to reach the 2 per cent. Inflation will continue to fall, meaning that buying or building a house will soon become cheaper again, and businesses will invest more or expand.
“Precisely for this reason, it is time for us to cut interest rates. But yes, the ECB is very conservative. Its forecasts are not neutral.”
You regularly criticize the European Central Bank's high interest rates. Why?
“One reason is that the banks benefit greatly from this. They currently receive 4% interest on their current accounts with the ECB. And how much interest do they offer their customers on current accounts? Zero percent! And they receive billions of euros from the ECB and the banks.” national economy in the eurozone. For Belgium alone this involves transferring almost 10 billion euros annually, and for the entire eurozone 140 billion euros annually. To give you an idea: the EU pays almost 50 billion euros annually to farmers, who then have to Meet all kinds of conditions and rules to benefit from this money.
“The banks receive almost three times the amount, without any conditions. That is why bank economists are happy when the ECB decides not to let interest rates fall. This gets relatively little attention in the media. But personally I think this is a great shame.” .
Economic growth in the eurozone now stands at nearly zero percent. Doesn't the European Central Bank threaten to paralyze our economy?
“Absolute. If you set interest rates too high, people will buy and invest less. This leads to lower demand for goods and services and a slowdown in the economy. So yes, these high interest rates are dangerous. But the ECB first wants to reach an inflation rate of 2 “We are almost at this stage at the moment. We are hovering around 2.6 percent.”
In the summer of 2022, interest rates were still below zero, and are now at 4%. Will we later look at this as a historical period?
“Four percent is high, but certainly not unprecedented. During the oil crises of the 1970s and 1980s, inflation reached 13 to 14 percent. The interest rate on government bonds was also much higher at that time. Compared to that time, this is Peanuts “.
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