In her latest public appearance, the President of the European Central Bank, Christine Lagarde, recalled that official interest rates have already risen by 2 percentage points—the fastest rate increase in the history of the euro—and announced that the institution will recalibrate its long-term refinancing operations and, in doing so, strengthen the transmission of rate hikes to banks’ lending conditions.
The monetary authority has reiterated its commitment to price stability and has stated that it will do whatever is necessary to ensure that inflation—the main enemy and the most damaging threat to the economy—returns to 2.0% over the medium term. It also acknowledges that this will not be easy and recognises that it will have an economic impact, something we have already begun to see.
Banks play an essential role in ensuring the smooth transmission of monetary policy measures to the economy. They demonstrated this during more than six years of zero interest rates. The ECB recalls the essential role banks play as transmitters of the new financial conditions in a context of a return to normal monetary policy.
It should be noted that, in Spain, the increase in financing costs for companies and households is being passed on at a slower pace than in other periods in the past, and the same is true of the normalisation process in the remuneration of savings.
By contrast, banks’ financing costs in financial markets have risen sharply, so that, as a result of all of the above, net interest margins for Spanish institutions have remained stable throughout this period.
Financing conditions depend on demand and supply and, while credit flows are being maintained in our country, demand has moderated in the face of the high and multiple uncertainties that exist. Even so, banks remain committed to providing, responsibly, the financing that the economy and households require.
José Luis Martínez Campuzano, Spokesperson for the Spanish Banking Association
