Europeans are now more interested in cheap money
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As part of the next “Economic Bulletin”, timed to coincide with the July meeting of the ECB Board of Directors on the rate (published in full only yesterday), economists from the euro area monetary regulator presented a work on the expectations of the population of the euro area to increase or decrease the key rate. Recall that within the framework of inflation targeting, central banks routinely operate with data on inflation expectations – the assumptions of the population and analysts about current and future inflation – and try to manage them. But studies of the opinion of the population about changes in the key rate are rare.
Unlike Russia, where the majority of the population acquired ownership of real estate as a result of privatization in the 1990s, for a significant part of the inhabitants of the euro area, the ECB key rate is a matter of direct concern: according to the authors of the work, Evangelos Saralampakis and Virginia Di Nino, floating rate mortgages about 7.3% of the population in the Eurozone, 12.6% pay a mortgage at a fixed rate, 43% own a home and 37.1% rent it, usually linked to derivatives of the ECB rate or its derivative. Part of the work states the different reactions of these groups to changes in the ECB key rate – naturally, it worries the holders of floating rate mortgages the most, however, as of May 2023 (last measurement), only 49% of respondents from this group said they would like to reduce the key ECB rates. This is a record level (less than 30% in the summer of 2022), in other groups there is less interest in reducing the key rate (20–25%). The fact is that the presence of mortgages in households of the euro area countries with a developed financial culture does not exclude the simultaneous interest in deposits and more complex financial instruments, so the general “wishes for the rate” of households change in a rather complicated way.
In the spring of 2022, there was a turning point in sentiment — if earlier the number of households in the euro area interested in lowering the key rate (see chart) decreased, while those who needed to raise it grew (the share of those who wanted cheap money fell), then after this date, the share of those interested in the declining ECB rate increased sharply. Since September 2022, the share of those who, on the contrary, are interested in the high rate of the ECB, has begun to decline.
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