The European Central Bank expects the inflation rate to decline throughout the year. Bitcoin is the only currency designed to gain appreciation over time.
Inflation has been described as the most hurtful tax for familiar groups, especially for the poorest ones, and in Europe, the year-on-year inflation rate entered to 5.1% last January, one-tenth above the rise that appeared in December.
This event marks the highest price high peak in the eurozone region in many years, and bitcoin (BTC) may rise as an alternative solution to face the high cost of living that is making the European population suffer so much.
The European Central Bank (ECB) thinks that the best move is to stick to its strategies to keep interest rates untouched. In doing so, it stands in front of the critics who expressed it should reinforce financial coverage in response to rising prices services in the eurozone.
The ECB highlighted that its council already gave green light to the series of decisions made at its financial hedging assembly last December. Therefore, it will sustain its policy of support to boost the economy and tolerate record inflation.
The agency also highlighted that its deposit rate would keep going at an amount under 0.5%, the central bank’s reference refinancing also keeps going at 0%, and its marginal credit facility keeps its position at 0.25. %.
The bank also said it would stick with a plan to stop its pandemic emergency bond-buying program in March, even as it keeps bringing support to the economy by keeping an older bond-buying program alive.
Along With these measures, bank officials believe higher inflation would decline through the year, though economists have disagreed and stated that the eurozone economy would experience higher interest rates. ECB President Christine Lagarde highlighted that energy prices and supply-side constraints are the main causes of inflation in the eurozone, not the inorganic money printing.
Side Effects that Come from Raising or Weakening Interest Rates
One of the most prominent and effective tools by central banks to put inflation under control is the increase in the interest rate. The Federal Reserve of the United States plans to raise its interest rates in March as a strategy to set a reduction on the quick loss of value of money, which in December ended up reaching its highest level in decades.
When interest rates reach a high peak, credit becomes more expensive, harming companies that need to borrow money to execute their investments and financial activities. This increase also harms people who need loans to acquire a house or an unforeseen expense.
However, by keeping interest rates low, the ECB appears to encourage people to borrow more and more money rather than encourage saving money for the days to come.
If inflation gets to surpass interest rates, the currency decreases its value, which means that the funds the population has and earns do not last as much as they need to. It happens because they always need to pay for daily goods and services.
By: Jenson Nuñez
