Lagarde celebrates the success in the fight against inflation in the world, but is concerned about another front

The president of the European Central Bank (ECB), Christine Lagardeconsiders that the fight against inflation is on the right track, although it is concerned about another front of the economy: the lack of a regional agreement on tax rules that is becoming a problemaccording to the agency Bloomberg.

According to that medium, Lagarde told the presidents of the European Commission, the European Council and the Eurogroup that the economy of the Euro zone faces stagnation in the coming quarters and downward dangersalthough the risks to prices have become more balanced.

Likewise, Lagarde believes that markets tend to react iinstantly to European divisions over the Middle East, Therefore, he said that the differentials between the different countries will be wider if the bloc does not unite more.

Interest rates in Europe: what the market expects

So, about interest rates, The market is anticipating a “pause” in the adjustment during the meeting that the European Central Bank (ECB) will hold this Thursday in Athensinstead of its usual location in Frankfurt.

Although eliminating the possibility of a future increase in interest rates is of great importance, both in the tone of the statement and in Lagarde’s subsequent statements, There is an issue that currently worries the market significantly.

The great uncertainty lies How long will interest rates in the eurozone remain as high as they currently are? after experiencing ten increases in the last 14 months from the negative levels they were at. These levels had placed the cost of borrowing at 4.5% among the countries that share the single currency.

This question is what most intrigues financial markets at the moment. According to a Reuters poll, interest rates in the eurozone are considered unlikely to increase in the current monetary policy environment.

However, the worrying part is that, according to the majority of economists consulted by the agency, interest rates will not begin to decline from their current levels, at least until July 2024. This is due to the ECB’s persistent fight against inflation, which is far from resolved.

Specifically, 58% of respondents estimate that the first interest rate reduction will occur in the third quarter of 2024 or later, and the deposit rate, currently at 4%, is expected to remain at 3.5% end of September next year.