A 2026 that will end with interest rate hikes

If we had had this conversation in January, most economists were clear: 2026 was going to be the year of interest rate cuts. But, as the months have passed, the analysis has changed radically. Everything points to us ending the year with hikes.

To understand it quickly, interest rates are the price of money. When this price rises, financing becomes more expensive. This intentionally cools economic activity and, ultimately, helps control inflation. With less money in circulation, the upward pressure on prices decreases.

And why have we reached this point? It all originates from the war in Iran. The first phase was the energy shock caused by the rise in oil prices. The second, and where we are now, is the transmission of this increase in energy costs to food, services, and the rest of the economy, and this leads us into what economists call a persistent inflationary spiral.

We are facing an economy in the shape of a "k": while low incomes deteriorate, high incomes continue to benefit from the situation. Inequality is widening. This fact also questions the effectiveness of a rate hike, as the impact is much more severe on families with fewer resources. A simple example: an increase in the mortgage payment derived from the rise in Euribor (which is already anticipating upward movements in interest rates) affects tight family budgets much more.

The consequences are known: more expensive mortgages and loans, an increase in the cost of public debt with the consequent increase in the fiscal deficit, a slowdown in consumption, and better remuneration of savings. Among the few pieces of good news is the return of deposits with more attractive returns.

In any case: thank you, Donald Trump.