The European Central Bank raised its key interest rate by 25 basis points, a quarter-point increase aimed at steering the eurozone back toward its target of price stability at around 2%. The decision was analysed on the Spanish radio network Cope's programme La Linterna, hosted by Ángel Expósito, with economic journalist Iván Alonso and Pilar García de la Granja, director of Mediodía Cope.
Alonso and García de la Granja discussed the reasoning given by ECB President Christine Lagarde, who linked the inflationary pressure to tensions in the Middle East and the war against Ukraine, factors she said continue to push up investment spending and the cost of energy infrastructure.
Stock market slips as oil nears three-month high
Spain's stock market fell 0.18% on the day the rate decision was announced, pulling back from the 19,700-point level, while Brent crude traded near a three-month high of $105.7 a barrel.
Persistent inflation weighs on growth outlook
Alonso said the worst news from the central bank was its upward revision of inflation forecasts for 2027, which he said confirmed that high inflation is here to stay. Inflation across Europe stands above 3%, and in Spain it exceeds 4%, he said.
García de la Granja warned of an economic cooldown, saying that when interest rates rise, the economy slows, meaning less is manufactured, less is sold and fewer workers are needed. She said analysts are debating the anti-inflation policy best suited to avoid squeezing households or destroying jobs.
Savers gain as mortgage holders lose out
Alonso said there are two sides to the coin in the upward revision of inflation figures. The positive side, he said, is that it raises the return on deposits for small savers, who now see yields of between 2.5% and 3.5%, even though that does not fully offset the rising cost of living.
Investor Manuel Pinto said that faced with high inflation, he would demand a higher return before buying a Treasury Bill.
García de la Granja said households are entering the worst time of year for their finances. The strain falls hardest on families with variable-rate mortgages facing their annual review. Alonso said the Euribor now exceeds 3%, adding roughly 70 euros a month on average to a mortgage of 150,000 euros.
Access to new financing has also become harder, with offers ranging between 2.5% and 4%. Antonio Gallardo of the consumer association Asufin said lenders have visibly tightened their credit requirements, demanding very high salary guarantees from those seeking a mortgage.
Risk of stagflation and energy tension
Forecasts point to a further ECB rate rise in December, which would be the third increase of the year. Alonso said the bank faces a difficult balancing act, needing to curb rising prices without dragging the economy into stagflation, defined as economic stagnation combined with high inflation.
Rising energy costs are adding to the pressure, with Brent crude averaging around 105 to 106 euros a barrel. García de la Granja cited estimates from Bank of America putting oil as high as $150 a barrel, a level she said would deal a direct blow to the productive sector and to middle-class families.
