European Central Bank: Why Thursday’s new rate hike is important

Every day, the European Central Bank (ECB) makes a press review of all important articles about it. After each major decision, he has several dozen articles in the German media. The Italian press also provides extensive coverage of the monetary institution. On the other hand, in France, there is nothing three times: some newspapers talk about it, of course, but in the internal pages devoted to the economy in general.

For several years, the Banque de France has implemented an active communication policy to counter this lack of interest. He organized public meetings in the regions, Governor Francois Villeroy de Galhau gave interviews to “influencers” on social networks and was invited to popular shows such as “Quotidien”. The number of “media spin-offs” (the number of articles) has almost quintupled in five years. Monetary policy coverage increased two and a half times from the first half of 2021 to 2022.

But it is. Outside of economic circles, the French find it difficult to get interested in the Frankfurt Monetary Institute. The Banque de France is listened to, but essentially on the state of the economy, far from dry monetary questions. “The role of central banks is absolutely necessary”Eric Dore, director of economic studies at Iéseg Business School, recalls. The ECB makes decisions that irrigate the entire economy. “It is responsible for setting interest rates, Which then affects the interest at which you can invest or borrowMr. Dor continues. Accordingly, it applies to mortgages, corporate bonds, government debt, individual savings…”

Very specific results

A tough decision awaits the ECB on Thursday, September 8. In July, for the first time since 2011, it increased the deposit rate to 0% (previously it was -0.5%). The Governing Council is currently debating a further increase, which will be either 0.5 points or 0.75 points. If the ECB chooses the second option, it will be the first time since 1999 that it has made such an increase. At the time, it was the first meeting in the history of the ECB and the aim was to ensure the credibility of the single currency.

The increase in these indicators has very specific consequences. In January, across the entire Eurozone, the average loan across all sectors combined decreased by 1.33%. In July it was 2.15%. In France, home loans rose from 1.12% to 1.57% over the same period. The same is true of French debt: the ten-year bond rose 0.2% at the start of the year and stands at 2.2% today.