Have we reached the top of the rate hike?

The Central Banks began in 2022 to raise rates rapidly, very abruptly because inflation was skyrocketing and it was not just a supply chain problem. The big question is until when are they going to go up and lately it seems that we are beginning to have the answer.

The increases in recent weeks by the Fed, the ECB or the Bank of England have been more timid than on previous occasions: 25 basis points. And this indicates that we could be arriving to the end point of this round of rate hikes.

The economy begins to absorb the impact of interest rates

The Central Banks have raised interest rates to curb inflation. And the world economy is beginning to absorb this rise in interest rates: on the one hand growth is beginning to slow down (collateral damage) and on the other inflation begins to moderate (which is the real goal).

The latest inflation data from the US already put it at 4.9% and this is beginning to be moderately optimistic. In the EU we are lagging behind but it is also seen how in many countries (including Spain) inflation is moderating (4.1% the latest data from our country).

The rapid rise in rates puts the financial system in trouble

Another indicator that the hikes may be coming to an end is that of all the things that could be broken by a rapid rate hike, what has gone wrong is the most worrisome: the financial system.

The banks are having problems and this is serious, because as we already saw in the 2008 crisis, financial crises quickly spread to the rest of the economy. Therefore, and although the Central Banks for the moment have ignored this signal and have continued to raise rates, the truth is that they know that they have to look carefully there and don’t let the banks collapse.

we are reaching the end

The conclusion of all this is that we are reaching the end of the rate hikes. We may still see some more but as long as inflation continues to drop I do not believe that the Central Banks step on the accelerator.

Mere mortals can begin to plan investments a little better and know that conservative investments are reaching the limit of profitability. We can now begin to look at letters with a longer term than those of 3 and 6 monthsit is not worth looking so much in the short term.

Variable-rate mortgages are therefore reaching their limit of increases. It seems that the 12-month Euribor will not be much higher than 4% if things do not change.