The danger for the Eurozone of not being competitive

By MrBicci | Bicci01 | 15 Sep 2023

Interest rate according to the BCE

The BCE raises interest rates for the tenth time in recent modern times, but what is actually behind this umpteenth hike. This effect has drastic and fundamental consequences in ordinary citizens, the so-called lower-middle class, because it goes to affect mortgages and also loans. This increase leads to a ripple effect among the underlying European banks that refer to the aforementioned rate, which guides others as if it were a beacon. We all know from macroeconomic news that when interest rates are low deposits are not cheap at all, it goes to affect an increase in investment and the economic circle closes and starts again. High rates equals a decrease in consumption and an increase in consumer savings and this is a necessary evil?
Everything has to be contextualized in the market you are in, for example, in the Eurozone countries like Italy, Germany and France will suffer a nice drop in GDP growth, and this will row against the States that have no say in the matter.

To Recap:

These days, interest rates are skyrocketing, prices are continuously rising, and inflation is climbing relentlessly. Inflation now without any more control, after the pandemic, recovering has been really difficult for many small and medium-sized enterprises, we have seen demand growing too fast compared to the supply circulating in the market. plus a continuous rise in commodities coming mostly from China doesn't help in managing the global market.

Forecast for the future:

The rate is expected to rise further and then have a relapse towards the middle of next year. One is still not sure, one is living in a time of economic uncertainty. That is why, at least at this time in history, those with mortgages may find themselves in extreme difficulty. Just think that between July 2022 and March 2023, the increase was 3%, a percentage that can affect a loan, such as one for a house or a car, so much. However, it is known that the rate will fortunately decrease, it is estimated that over the next few years it will decrease to approximately 2.1% in 2025. It is not certain that we will ever return to the pre-pandemic stability situation. just think that we are entering a new way of seeing the world and just as our grandparents in their time when rates remained very low for many decades would never have imagined such increases, so we should not underestimate this increase, which has the whole idea of being a starting point and not a definitive arrival point.