As officials work to rein in the region’s record-high inflation, the European Central Bank on Thursday announced yet another significant interest rate increase.
Officials in Frankfurt met economists’ expectations by announcing a second consecutive three-quarter point increase. They increased the deposit rate to 1.5%, which was previously in negative territory until July, citing “strong progress in eliminating monetary policy accommodation.”
The ECB is engaged in combat on two fronts, with expectations of a recession before the end of the year. These fronts are record-high inflation and a slowing economy. The central bank is trying to strike a delicate balance because if rates are raised too quickly to combat inflation, the overall economy could suffer.
In the meantime, according to survey findings released on Monday, the eurozone is gradually going into a recession as business activity is declining at the fastest rate in almost two years and consumer demand is being dragged down by the cost-of-living crisis.
The S&P Global composite production index decreased from 48.1 in September to almost a two-year low of 47.1 in October. The reading fell short of experts’ expectations of 47.5. The rating was below 50 for the fourth consecutive month, indicating that the economic downturn will continue.
Survey results published on Monday show that the eurozone is slowly entering into a recession
“The eurozone economy looks set to contract in the fourth quarter given the steepening loss of output and deteriorating demand picture seen in October, adding to speculation that a recession is looking increasingly inevitable,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said.
Last but not least, housing prices in the US grew again in August but at a considerably slower rate as prospective buyers’ appetites were dampened by rising mortgage rates.
Housing prices in the US rose by 13% from a year earlier, according to the S&P CoreLogic Case-Shiller Index, but this increase was significantly less than the growth of 15.6% observed in July. Since the data series’ inception in 1987, the yearly rate has decelerated by an average of 2.6 percentage points every month.
“These data show clearly that the growth rate of housing prices peaked in the spring of 2022 and has been declining ever since,” Craig Lazzara, managing director at S&P DJI, wrote in a release.