The IMF warns of the “risk” of delayed effects in the rate hike

The International Monetary Fund (IMF) confirms that the abrupt rise in interest rates with which many central banks have responded to the inflation crisis is not bearing the same results everywhere. “The effects of monetary policy are strong in some countries and weak in others,” the organization points out in the global economic forecasts document that it will publish on April 16, and of which it has already begun to advance some analytical chapters. Specifically, there is the possibility of delayed and “unexpected” consequences of this increase in the official price of money. “The risk that the [economic] cooling effects of monetary tightening are yet to come must be taken seriously where fixed-rate mortgages are recalculated in short periods of time,” warns the text, which reinforces that message to that national or supranational authorities take it into account “especially if households are highly indebted.”

The reason why this divergence occurs, believe the Fund's analysts, is found in the transformations that the real estate market has experienced. To this he dedicates chapter two of his next forecasts, which was released this Monday with the title

. The document seeks empirical evidence to affirm that monetary policy “has greater effects” in countries with more variable mortgages; where households, and particularly homebuyers, are most indebted; and where the housing supply is more limited. That is to say, in the places where many citizens are more exposed to suffering through mortgages from the rise in rates with which the central banks have tried to reduce inflation, which in the European case has resulted in the sharpest escalation. abrupt in the history of the ECB. With this increase in the cost of loans, consumption suffers (which is what the monetary authorities have sought to reduce the pressure on prices in general) because many families would begin to have more financial difficulties.

However, although “many analysts thought that higher rates would lead to a slowdown, or even a recession, global growth has remained stable,” indicates the IMF. That is what leads him to look at a series of countries, in which he determines whether restrictive monetary policy has more or less strong effects. The classification is led by Australia, Chile and Japan; and Israel, Colombia and Hungary close it. Spain is located in the middle of the table, in twelfth place out of 25 economies analyzed, in line with countries such as the United States, Italy, Austria or Sweden. The organization's analysis focuses on five aspects: percentage of fixed mortgages, regulation of credit limits based on the value of the property (basically, that the mortgage cannot exceed a certain percentage of what a house costs), indebtedness of the homes, restrictions in the supply of housing and its overvaluation (that prices have heated up). In the Spanish case, the factors that would be most felt by the rate increase are the first two.

But the interesting thing is that it then analyzes whether these same aspects have evolved in recent years in the sense of reinforcing monetary policy decisions or the opposite. And the conclusion is that this transmission has clearly been weakened globally, in part due to the changes that the 2008 financial crisis caused in many economies. As an example, the IMF analyzes the evolution of fixed mortgages. Of the 22 countries for which it provides data, all but two (Japan and Canada) now have a higher percentage of loans with invariable rates than in 2011. Spain is among those with a lower total percentage (around 30%), but it is one of those that has advanced the most since its weight in the market has practically doubled in a decade.

“Earlier” actions

The authors of the analysis do not rule out that the central banks' own reaction to the inflationary crisis may also have something to do with the loss of influence of monetary policies. “The fact that rates have risen in the last two years with a speed, degree and amplitude unprecedented in decades could also have affected transmission,” says the Fund, who highlights that “this evidence has implications for monetary authorities.” and macroprudential”. In other words, central banks and governments would do well to take into account the changes that have occurred in recent years. These are summarized in that, on the one hand, “stricter macroprudential regulations improve economic and financial stability, and should be adopted with these objectives in mind”; But this leads to the paradox that “hunting policies could have lesser effects in countries with relatively strict regulation.”

“Where the transmission of monetary policy is weak, earlier and more impetuous action can be undertaken when the first signs of overheating or inflationary pressures appear,” the organization's experts suggest. “Continuing to tighten or maintain high interest rates for longer could pose a great risk now,” they add in a direct message to the central banks, of whom they say that “although they already incorporate these possibilities into their decisions, the effects on consumption "They could still be higher than expected." This is because, due to the lag with which the effects of monetary policy on the economy are usually noticed – approximately two years, according to the academic literature used by the Fund's analysts – it is not ruled out that consequences are yet to come. of the change that began in 2022. In addition, the study highlights that the effects of the change in the official price of money are stronger in increases than in decreases. “In short, the longer interest rates remain high, the more likely it is that households will end up feeling their pinch, even where until now they seem relatively sheltered,” the document concludes.

Follow all the information on

and

, or in our