When Will Croatian Loan Interest Rates Begin to Pick Up?

By 6 February 2022

February the 6th, 2022 - When it comes to the question on many lips of precisely when Croatian loan interest rates might pick up again, the European Central Bank announced recently that its key interest rates are to remain at their existing minimum levels, despite record inflation which is currently occuring right across the Eurozone.

As Poslovni Dnevnik writes, that said, inflation, which was considered temporary by everyone last year, is obviously "spilling over" into this year as well, so much so that it exceeded five percent in the Eurozone back in January.

However, this decision of the ECB to not start with a significant tightening of their monetary policy was expected, given that the President of the ECB Christine Lagarde has stressed before that it should not be rushed, and that there will be no increasing of any key rates before the year 2023.

Some analysts are already questioning the ECB's assessment because it is obvious that inflation is unfolding much more rapidly than their previous forecasts claimed it would, and they think that the ECB itself also underestimates this very real risk.

With all of that having been said, even if there has been a change in perspective, one can hardly expect a sudden change in the narrative because even that recognition alone could be counterproductive. Recently it was indicated that key interest rates, and that includes those attached to Croatian loans, should not increase (it all depends on further inflation), but of course the door was left open for this to happen next year. However, the ECB remains on the path of reducing bond redemption above all else.

The ECB also said in a statement that the Governing Council would suspend the net purchase of assets under the Pandemic Emergency Purchase Programme (PEPP) at the end of March this year. As for the asset purchase programme (APP), it will be gradually reduced, and it is expected that “net purchases will be completed just before the key ECB interest rates start to rise”.

The ECB is therefore again at the back of central banks when it comes to changes in monetary policy. The US Federal Reserve announced a recent increase in key interest rates, on several occasions this year, and the Bank of England (BoE) also raised its key rate just a few days ago.

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