Filenews 16 December 2022
There are two pieces of bad news announced yesterday by the European Central Bank (ECB) that are of interest to millions of citizens in the Eurozone: Yesterday's 0.50% interest rate hike may be the last of the year but more are expected to follow in 2023, while inflation will remain high for longer.
In particular, the European Central Bank increased its key interest rates by 50 basis points (half a percentage point), as expected, with the deposit rate now reaching 2% and the key refinancing rate at 2.5%. Interest rate increases are expected to continue, as indicated by the ECB's announcement. "Based on the significant upward revision to inflation forecasts, the ECB expects to raise interest rates further," the statement said. The ECB now predicts that inflation will remain high for longer. However, it is expected to fall from 8.4% this year to 6.3% in 2023, as it is projected to de-escalate significantly during the year.
For 2024 it is projected to fall further to 3.4% and in 2025 to 2.3%, i.e. after three years it will still be higher than the ECB's 2% target.
Keeping interest rates at restrictive levels will reduce inflation over time, dampening demand and also protect against the risk of a sustained increase in inflation expectations," the statement noted, adding that future interest rate hikes will continue to depend on the data on the course of the economy and be decided at each meeting.
Restructuring
The question is how much bank customers will endure with these increases and whether there is currently movement in restructuring. Sources from the Bank of Cyprus told "F" yesterday that so far loan repayments continue as normal and no arrears have been created higher than in previous months.
It is reported, however, that there are customers who have started asking about other options they may have in order to cope with their increased liquidity needs. The bank examines all cases, each one separately and where there is a real need it provides the appropriate solutions, he told us.
In yesterday's "F" report, Hellenic Bank sources said that its existing customers should not worry, because the majority of loans are not affected by the ECB's increases. They also noted that those who want there is also a solution of restructuring.
