Inflation- scenarios

In early June, the European Central Bank (ECB), confirmed the rise into the interest rates by 0.25 percentage points; as a response to the overall increase in the Eurozone. Projections point to 6.8% in 2022, 3.5% in 2023 and the target of 2.1% in 2024.

And this reality extends to the members of the Organization for Economic Co-operation and Development (OECD). According to the June report, the world economy is showing a very unfavourable trend because of Russia’s war against Ukraine. In view of the December scenario, two months before the war, the OECD predicted a world economy growth of around 4.5% in 2022. Now, after more than three months of conflict, the figure stands at 3%!

A rhythm is recognized as often global or close. United States- 2.5% instead of the initial estimate of 3; ii) Eurozone- 2.5% contrary to the recommended reform of 4.3%; iii) Japan- 50% increase in the estimate, with the current projected value being 1.7%; and, iv) China- forecast of 4.4% versus initial estimate of 5.1%.

Thus, analysts believe in an upward revision of the ECB’s key rate; and, let such news be announced in July. However, divergence in relation to the number of economic restrictions in view of the potential impact on the performance of Abrdn’s Europe Treasury bonds). Incidentally, recently Christine Lagarde (President of the ECB) assumed the completion of the changes after the third. In practice, despite the evident economic slowdown, banks will see how their interest rates are the result of cyclical inflation.

And, Portugal is no exception, as in Tim’s June Economic Bulletin (BdP) it is mentioned that: “increase in reflected light mainly (war)”, even if the Portugal factor is additional to the recent energy increase factor, the 2023-24 deflator. This scenario is more adverse than the projections announced in March by Mário Centeno: i) inflation would increase to 4% in 2022; and ii) it would decrease to 1.6% in 2023 and 2024. Only in a very adverse macroeconomic context was it estimated that it would reach 5.9% in 2022, 2% in 2023 and 1.9% in 2024.