“In view of new rate hikes and a sharp slowdown in GDP” – Corriere.it

We expect economic activity to substantially slow down in the coming quarters, these are the heavy words spoken by ECB President Christine Lagarde in a hearing in the European Parliament’s Monetary Affairs Committee. Lagarde explained that there are four reasons behind the scenario of an economic slowdown. The first is high inflation which is holding back spending and production across the economy, a headwind reinforced by disruptions to gas supplies. Secondly, the strong demand for services is losing momentum. Third, weakening global demand, even in the context of tightening monetary policy in many major economies, and worsening terms of trade: this will lead to less support for the euro area economy. Fourthly, finally, there is high uncertainty, as shown by the decline in household and business confidence.

The weight of the war

The unjustified war of aggression on Ukraine continues to cast a shadow over Europe. The economic consequences continued to unfold. The outlook is getting bleaker. Inflation remains too high and is likely to stay above our target for an extended period of time. The president of the ECB then stressed.

In view of new increases in interest rates

Based on the medium-term inflation outlook, the Governing Council decided to raise the ECB’s three key interest rates by 75 basis points, in addition to the 50 basis point increase announced in July. As things stand, we expect to raise interest rates further in upcoming meetings to dampen demand and prevent the risk of a persistent upward shift in inflation expectations., said the president of the ECB. We will regularly evaluate our political path in light of incoming information and the changing inflation outlook. Our future policy rate decisions will continue to depend on data and will follow a meeting-by-meeting approach, she added.

The risks of a weak euro

The depreciation of the euro helped to amplify inflationary pressures. This was stated by ECB President Christine Lagarde speaking to the Econ commission in the European Parliament.

S&P lowers GDP growth estimates in the eurozone …

Eurozone gross domestic product will grow more than expected this year, reaching + 3.1%, while the eurozone economy is expected to stagnate by 2023. The figure emerges from the Standard and Poor’s report on the economic prospects of the eurozone. A sharp slowdown in eurozone growth is imminent, the report reads. According to the rating agency, after 5 consecutive quarters closed in positive territory, a period, two or three quarters, of reduced activity should arrive. This is why S&P expects the eurozone economy to stagnate next year (0.3% versus 1.9% the previous year). For this year we are revising our growth forecast up to 3.1% from 2.6% and lowering our unemployment forecast.

S&P Global also cut Italian GDP estimates for 2023 to -0.1% from the + 2.1% of the previous forecast. The rating agency’s report, on the other hand, shows an increase in growth for the current year to 3.4% from 3.1%. Inflation will stand at 7.8% in 2022 and 4.3% in 2023 while the unemployment rate will rise from 8.3% this year to 8.6% in 2023.