“The ECB no longer believes its forecasts,” says ING Brzeski economist on the interest rate decision.

“The ECB no longer believes its forecasts,” says ING Brzeski economist on the interest rate decision.











Both the Federal Reserve and the European Central Bank raised interest rates by 25 basis points this week. explains Carsten Brzeski, chief economist at ING Germany am working.


Listen to the full conversation with Carsten Brzeski here:


This was the seventh time the European Central Bank raised interest rates in just under a year. In the US, they were already at their tenth increase in just over a year.

  • “We can already see the economy take off,” Brzeski says. Earlier this week we saw results Bank lending surveyIt was clear that the demand for new loans in the euro area had fallen very sharply.
  • “We’ve never seen such a sharp tightening before, so it was good to bring the pace down a bit.”

Time for a break?

  • Brzeski believes this has not yet happened in Europe. Christine Lagarde (European Central Bank President, ed.) reiterated again yesterday that there is no break coming yet, and that they will continue to raise interest rates. But I don’t think they can continue like Lagarde tried to fool everyone yesterday. But at the next meeting, on June 15th Another quarter will be added.
  • “I think it’s a big problem with money policy that you only see the full impact of what you decided in the past six months or a year or a year and a half later,” Brzeski says. In fact, the pause is long overdue, and the problem is that the ECB, as it is so often wrong in its estimates, no longer believes its own forecasts. So today they are looking more at current developments, as inflation is still very high.”
  • So the ECB decided to move on, realizing that it could not really influence current inflation. I think in six months we will be able to say that it was clear that what the ECB was doing was, in fact, wrong.”
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Hammer and anvil

  • On the other hand, the ECB thus wants to reduce inflation, but without crashing the entire economy. “I think if we get another quarter, a deposit rate of 3.5 percent and a financing rate of 4 percent, we’ll be good,” Brzeski says.
  • “I think after the June meeting it is time to slow down a bit and enjoy the summer a bit. They are waiting a little bit at the ECB to see the consequences of these sharp rate increases so far.”

United State

  • So it doesn’t seem like Europe is going the way of the US by taking a break. There are still a few defining factors at play in America: regional banks, the debt ceiling, and yet a recession is imminent. Then it is natural to expect that the Fed will actually cut interest rates at the end of this year. It is also much higher there than it is in Europe.”
  • “Europe is always three to six months behind the US, so I don’t think we’ll see a cut this year, but we’ll definitely have the discussion in the spring of 2024,” Brzeski said.

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