The ECB's 2% target won’t be reached until the end of 2024

As happens every month, investors were waiting with bated breath to hear what came out of Thursday's meeting of the European Central Bank (ECB), despite the fact that there is no major change in the economic scenario that justifies a change in messaging or a rise or drop in interest rates.

"Growth data remains weak, although not as much as expected; inflation is moderating, but remains above a comfortable level, and geopolitical circumstances have deteriorated very quickly. There’s no justification for raising rates or lowering them. Normally, the messaging is continuous until something real changes," explains Alberto Matellán, chief economist at MAPFRE Inversión.

In fact, the MAPFRE expert doesn’t believe that the 2% target will be reached until at least the end of 2024, taking into account the volatility of the general inflation rate and the cost of lowering the underlying rate. He also considers that this objective is “tremendously nuanced” - meaning that it remains consistently below 2%.

Economic developments are also conditioned by third quarter earnings reports, which Matellán feels are better than analysts first expected. “I’m of the opinion that the earnings presentations are more positive than we first thought they would be, and that guidance is prudent, which opens the way for companies to improve their expectations in the future,” he said.

This week it was also revealed that the number of mortgage applications fell 22.7% in August, compared to the same month of the previous year. While this is a notable decline, MAPFRE Inversión’s chief economist rules out a real estate bubble, noting that transaction volume has fallen by a smaller margin, meaning that there is still an active buyer base purchasing property, not out of necessity, in a more prime market. “Nothing is bursting, but the market is adjusting,” he says.

Fear in the markets

According to Matellán, the current situation of fear in the market is driven by two things: the unclear economic scenario and geopolitics, which has worsened rapidly in recent weeks.

In this context, the chief economist at MAPFRE Inversión recalls that the quest for security at this time depends on investors themselves, who must set their objectives properly and trust the right advisor.

“The classic binomial of fixed income and equities has been lost, but in times like these, fixed income regains its capacity to offer security, since at the levels it’s at, fund managers have greater freedom,” he adds. “But looking for security depends more on themselves than on the market, on them setting goals and getting the right advice.”