for years the priority of central banks -to get out of the 2008 crisis and then due to the pandemic- has been to push the economies hard. The peak was when low interest rates were no longer enough and we had to keep pumping money buying bonds, often from the states. Central banks went from ogres to benefactors. Societies got used to it. And they too.

But 2022 marks the end of this era because inflation has run amok. Now the priority is to stop it because distorts the economyagitates the citizens and creates social unrest. In France, where inflation is lower than the European rate (5.4% compared to 7.5%), Marine Le Pen’s entire campaign has revolved around the loss of purchasing power of wages.

In the United States (unemployment 3%, inflation 8%) the Fed has already raised rates by 0.75% and it is believed that it will raise them another 0.5% (the expected was 0.25) in each of its next two meetings. Also going to reduce your bond portfolio, which is taking joy (money) away from the economy. By the end of the year, they will have gone from 0 to 2.75% of interest. But there are those who don’t believe it enough and Biden and Powell, the chairman of the Fed, are undecided.

The fear is that the aggressiveness in raising rates to tackle inflation end up causing a recession. Panic has invaded the markets and the Nasdaq, the index of technology companies, the most dynamic, has fallen 36% so far this year.

In Europe, the ECB (average unemployment 7% compared to 3% in the United States) was more temporizing. Christine Lagarde, its president, said that she saw it difficult for interest rates to rise before the end of the year. But everything has changed and on Wednesday she stated that the ECB will stop buying debt in June and that rates will go up soon. Before, the president of the Bundesbank, Joachim Nagel, a “hawk & rdquor ;, had warned that the delay in raising rates – so as not to stop growth – may later force them to have to rise more intensely and further damage the economy.

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This Friday, the vice president of the ECB and former Minister of Economy, Luis de Guindos, was in Barcelona, ​​at the Leadership School run by Duran Lleida en Foment. And he confirmed the turn of the ECB, which can greatly affect countries like Italy and Spain. In June, the ECB will stop buying bonds. It returns to normal (forgotten) and the debt will have to be sold in the markets at the price set by supply and demand. The great social programs of the states, which the ECB ultimately financed by buying debt, will no longer have guaranteed financing. And in this new context, states will have to be more vigilant that spending does not trigger the deficit.

Guindos did not go further. When asked if the interest rate would rise three times by 0.25% before the end of the year, from the current -0.5 to 0.25%, he simply said that this was what the markets believed. . But, he added he, everything is uncertain and it depends on changing circumstances. With inflation, “all central banks have been wrong.”

For Spain, what is relevant is that the bell for the end of the festival has rung. The open bar has finished to not worry about the deficit because the ECB is no longer the safe and benevolent buyer.

The question is whether the Government – which continues to announce measures that increase spending – has heard the bell. Inflation (8.3%) is still higher than the European 7.5% and, although the cap on the price of gas in electricity (which the Government approved on Friday) can help, Calviño herself believes that the CPI will end in 2022 at 6%.

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If after the summer – which can go well for the return to normal tourism – the economy grows less, perhaps due to the effects of the war in Ukraine, the alternatives will be complicated. spain still must receive part of the conditional European regeneration funds. Will it be possible to continue maintaining some social programs? Will pensions go up 6%, the expected rate of inflation?

The new era that central banks have entered poses tough questions for the policies of Sánchez and Calviño. Let’s not say the demands of Podemos. The consolation – not a small one – is that the differential between the Spanish and German bonds is lower than the Italian one. Are we better than Draghi’s Italy?


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