The ECB Should Not Follow the FED’s Caution
The recent statements from Federal Reserve Chairman Jerome Powell confirm the cautious approach of U.S. monetary policy. While the U.S. economy remains strong and inflation is still above stability parameters, the European Central Bank (ECB) cannot afford to wait. The Eurozone faces different economic conditions, requiring swift and decisive actions. ECB President Christine Lagarde has announced two possible interest rate cuts in the coming months, targeting a 2.5% rate by year-end. This commitment must be honored to provide certainty for markets, businesses, and families.
The Impact of Tight Monetary Policy on the Eurozone
Over the past two years, restrictive monetary policy has significantly affected the European economy. Credit growth has slowed, investments have declined, and the cost of public debt has increased, burdening member states. With inflation decreasing, labor markets stabilizing, and economic recovery still fragile, continuing the path of rate reductions is essential to avoid stagnation.
Declining Bank Loans: A Threat to Businesses
According to Unimpresa’s Research Center, business loans have dropped sharply since 2022. After reaching a peak of +4.8% growth in August 2022, loans declined by -6.2% in August 2023 due to higher interest rates. This downturn particularly impacted sectors like construction and manufacturing, which saw reductions of 8.8% and 6.1%, respectively. Although the ECB began lowering rates in June 2024, banks remain cautious, keeping strict lending criteria in place.
A Possible Recovery in 2025
Looking ahead, forecasts indicate a resurgence of bank lending. With expected rate reductions, stable inflation, and an improved economic climate, credit is projected to grow by 2.4% in 2025 and 2.7% in 2026. However, for this recovery to materialize, the ECB must act decisively, independent of U.S. monetary policy.
Europe Needs Independent Monetary Policy
Unimpresa’s Vice President, Giuseppe Spadafora, emphasizes the importance of strategic autonomy in monetary policy. The ECB must not blindly follow the FED, whose actions respond to different macroeconomic dynamics. While the U.S. can delay rate cuts, Europe cannot afford such a delay due to its fragile economic growth.
The ECB must continue reducing interest rates to restore investor confidence and ensure recovery. A growth-oriented monetary policy is essential while maintaining price stability. The ECB’s mandate is clear: to ensure economic stability and competitiveness in the Eurozone.
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