ECB interest rate hikes will reach peak in 2023

 In Bank of Portugal, Central Bank, News

“We are nearing the last and final set of interest rate hikes in the coming months” predicted the Governor of the Bank of Portugal, Mário Centeno this week.

However, the former Portuguese finance minister warned that interest rates would not “instantaneously be cut” and that the “monetary belt tightening” would “remain in place for some time”, and only if inflation begins to come down in 2024 will the ECB make interest rates cut.
“We could be getting closer to the time when monetary policy will, in terms of setting interest rates, hit its maximum in this round of increases. From there on interest rates will not be cut instantaneously, not at all”, said Mário Centeno on Wednesday when he presented the Bank of Portugal’s May Financial Stability Report.
“If in June or July – and who knows — inflation shows some signs (of coming down), as was seen at the start of the year, which fits in with the base scenario of ECB forecasts, this will be a very important moment for the monetary policy cycle in one of these coming months”, said Centeno pointing to a goal of 2% inflation in the medium term.
However the Governor of the Bank of Portugal also warned that the most vulnerable families were at risk of default given that mortgage repayments would continue to rise until September and recommended that the banks take advantage of their improved results to “adjust the conditions of their mortgage loans” to meet what families could afford.

Photo Lusa – André Kosters