With inflation stabilising, the decisions of the world's central banks are eagerly awaited by everyone in the financial world. What are their latest decisions? What are they based on? Wealth A7 explains in this week's article.

September's decisions

After 18 months of uninterrupted inflation, affecting all sectors and markets, central bank decisions are more influential than ever. While they are continually raising rates to curb this inflation, are we reaching a plateau? The ECB was the first to make its announcements, raising rates by 25 basis points, the 10th in a row, to reach a refinancing rate of 4.5%, the highest since the launch of the euro in 1999. This week, the FED (US central bank) and the BOJ (Japanese central bank) took slightly different decisions, maintaining their rates. However, the rhetoric is the same, with all these institutions indicating that inflation is likely to last longer than expected. These comments did not reassure the markets, which reacted negatively.

Why do banks vary refinancing rates?

The main objective of central banks is to control inflation without damaging growth. In fact, when rates are low, there is generally a large amount of money in circulation, which contributes to consumption and therefore to production. This in turn increases GDP and inflation. This is what we have seen in recent years. On the other hand, when external factors cause inflation to rise, as has been the case since last year, the banks raise interest rates to try to contain inflation. Today, inflation seems to have come to a halt, hence the decision by some central banks to stop raising key rates.

The consequences of these increases are clear to see, as they have automatically led to a rise in bank lending rates.

If the central banks stop raising rates, we can assume that we have reached a plateau. Given the latest announcements, rates are unlikely to fall in the short term. The economic situation has been assimilated by everyone in society, and this is now being felt in the behaviour of banking institutions. That's why it's important to stick to your plans and keep looking ahead. Wealth A7's specialist financial markets and financing advisers are here to help you take advantage of investment opportunities and to support you in your financing projects, so get in touch!

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