According to him, it could very well be that interest rates are actually raised further. De Jong thinks the so-called “hawks” within the European Central Bank (ECB) currently have the upper hand. “There will be at least one rate hike, and the difference between the two forecasts is another rate hike,” he says. “Obviously it doesn’t make much of a difference, but it’s still a different picture than it was before.”
“Obviously it doesn’t make much difference, but it’s still a different picture than before”
According to De Jong, the reason for analysts’ pessimism lies in inflation – and in particular the lack of prospects for a decline in inflation. Even despite the expectation that inflation will come down in the coming months. “Really decent, too, but what you’re also seeing is that this is mainly due to energy prices,” says De Jong. ‘But if you overlook those prices and food prices (core inflation, ed), they haven’t gone down very sharply. It is also well above the ECB’s 2% target.’
To trust
And that will remain the case for the foreseeable future, analysts believe. As far as De Sciglio is concerned, they don’t dare to rely on the provisional decline. “We know, of course, that rate hikes affect the economy with a lag,” says De Jong. And inflation too. So if you keep raising interest rates until you get 2% inflation, you’ve gone too far.’
According to De Jong, it is therefore a good question when interest rates will fall again. While many economists think the ECB will lower interest rates again starting in the second quarter of 2024, De Jong isn’t so sure yet. “There’s still a long way to go, and it all depends on how inflation is at the time,” he concludes.
Gasoline price
As an example, he cites the price of gas, which rose enormously last year, but has also fallen enormously again. “I have heard that the price will go up again in the winter if everything goes wrong,” concludes De Jong. “That will push inflation up, but if that also leads to an acceleration in wage growth and thus an acceleration in core inflation, then I think interest rate cuts in the second quarter of next year are not yet foreseen”.