Christine Lagarde in Sintra on the coast of Portugal launches her new cautionary tale. Before the bankers from all over the world gathered for the annual appointment organized by the ECB, announces that “our work is not finished”. Taking interest rates from zero to 4% in one year was not enough.
So on with the squeeze. To the point of considering it unlikely that the European Central Bank peak interest rates in the near future. And that’s why it shouldn’t falter in its fight against inflation, Lagarde explained.
The revolt of the world of politics
The Italy of politics doesn’t fit. Made in Italy Minister Adolfo Urso speaks of “poorly understood” and “ineffective” measures. Environment Minister Picetto Fratin argues that the rate hike it will be “a boomerang”. For the head of Foreign Affairs, Antonio Tajani “it is a disappointing behaviour”. The chorus of protests is vibrant as befits a heavily indebted country like ours.
“The choice announced by Christine Lagarde is a senseless and harmful choice – roars Matteo Salvini – also because the inflation was caused by energy prices. Does Lagarde have a variable rate mortgage? Do you know how much the installments are increasing? Who benefits from these absurd decisions?”. He will talk about it with Fabio Panetta: “We will ask for a meeting with the Italian representative on the board of the ECB to discuss the problem and analyze solutions”.
The prudence of the markets
The markets partly believe it and partly don’t. The Milan Stock Exchange gains half a point while Frankfurt and Paris revolve around parity. There is no shortage of doubts about the effective ability of the ECB to continue with the tightening for much longer. Vote for the European Parliament next year and a solution must be found. Economic activity is unsatisfactory in the Eurozone, bad for France, very bad for Germany.
An alarm bell: Manufacturing costs fell at fastest pace since mid-2009, despite factory price cuts for a second month. It means that the increase in wages, so feared by central bankers because it is explosive on the accounts, is not a tiger but a big cat. Production costs in June fell at the fastest pace since mid-2009. Translated it means that the drop in prices of energy leaves ample room for wages. And that’s why employment rises (even in Italy) and producer prices collapse, paving the way for a reduction in consumer prices.