• The policy of the European Central Bank (BCE): for January, the annual inflation in Europe increased to 3.2 %, against an objective of 2 % fixed by the BCE.

In France, the prices in the consumption increased of 2.8 % over the last twelve months, what establishes a record of inflation since May, 1992 (that is more than 15 years). They fell of 0.10 % in January compare to December, but the price index of the food increased by 1.40 % in January compare to December (that is an increase of 4.2 % compare to January, 2007).

• In its last comments, the BCE emphasizes the economic slowing down (the growth in the Euro-zone increased of 0.4 % in the last quarter of 2007 against 1.4 % in the previous 3 quarters. In these conditions, it seems that the increase of the inflation is not any more the main subject of anxiety of the BCE; the economic slowing down could lead it to lower its rates.

Financial markets, from their part, already anticipate a decline of the rates of the BCE from 0.5 to 0.75 and consider that the intervention rate of the BCE will be situated between 3.25 % and 3.50 % late in the year.

• The performances of stock markets: The year 2007 was particularly enlivened.The CAC 40(PARIS STOCK INDEX) meet the first crisis on March 14th, 2007 (5 762 points on February 26th against 5 296 points on March 14th) .That is a decline of 8 %.

After a period of resumption during which the indication reached its strongest value (6 168 points on June 1st), the CAC meet a new crisis on July 27th and August 17th, 2007 (respectively 5 644 and 5257 points).That is a respective decline of 6 % and 7 %, before ending the year on a stabilization.

Stock markets again showed that they were very risky, what incites the investors to return towards the instruments of interest rate by abandoning markets shares. So the rates are slightly influenced in the decline. The evolution of stock markets constitutes the dominant factor which directs the interest rates in the decline.

• The American economic situation: the American growth strongly fell over 2007, from 4.9 % (from January to September) to 0.6 % in the last three months of the year. The trust of the American consumers degraded in February, the confidence index of Michigan stand out in 69,6 (against 78,4 in January), it is the lowest level since February, 1992. The indication ISM (Institute for Supply Management) put in evidence a decline of the production of services in the United States for the first time since March 2003 ( 41,9 % in January :the composite indication ISM is 44 %).

The unemployment rate is estimated at 4.9 % in January 2008 against 5 % in December, 2007. In January and for the first time in 3 years, 17 000 jobs were eliminated. This decline of the unemployment rate results without a doubt from less important registrations number, the Americans credibly being discouraged by the lack of perspectives of jobs.

According to the statistics published on Wednesday by the department of the Work, the inflation (including the energy and the food) in yearly rhythm accelerates in the United States reaching 4.3 % in January against 4.1 % in December. The American central Bank, the FED, had to lower its forecasts of growth for the year 2008 in the United States, to return them to 1.50 %, against 2.50% before.

• The American real-estate market meets its gravest crisis for more than 16 years: the building trade confirms its signs of weakness in the United States. The department of the Business announced a decline of 3 % in January, 2008 of the number of delivered building permits. This is lowest level for more than 16 years since November, 1991. The prices of the real-estate globally fall by 6 %. The private individuals use the value of their immovable property as a source of financing for their consumption, and this source of financing is going to fall.

The current decline of the real-estate prices penalizes the consumption (which represents approximately 70 % of the American economy). The value of the real-estate also plays a significant role in the confidence of the American households which will be affected; 

• The policy of the FED: the American central Bank had increased its interest rates at a level much higher than the BCE at the beginning of the year 2007 (5.25 % against 4 %). It was forced to develop its rates of intervention in order to avoid reducing the risks of recession.

The FED is afraid of mass failures in the banking system and wishes to avoid a recession by an accommodating monetary policy. For the first time in the History, the FED lowered its rate by 1.25 % in 8 days (from the 22nd to the 30th of January, 2008) to the level of 3 %. Financial markets anticipate that the American central Bank is going to continue to soften its policy from its next meeting, in the middle of March.

Our forecasts of interest rate for year 2008

We foresee that the short-term and long-term interest rates should remain close to the current level at the end of year. Four factors lead us to these forecasts:

• Financial markets anticipate a decline of the intervention rate by the Central European bank. It is likely that the BCE will be forced to direct differently its policy;
• The American central Bank will certainly lower its intervention rate to 2 % to face the economic slowing down in the United States;
• Economic growth, in Europe as in the United States, will appreciably be weaker in 2008 than in 2007. In an economic context close to the recession, the monetary policies of the central Banks will be more flexible;
• Stock markets should not know lasting sensitive resumption in 2008 and should remain subjected to risks of volatility.

After the very important increase of the rates during 2006 and 2007, this stabilization is a good news for all the borrowers who can continue to borrow from rates in decline.

The interest rates evolved in the following way on February 22nd, 2008

• The Euribor 3 month’s rate is in increase and reaches 4.75 % on February 22nd, 2008 (against 4.30 % on February 15th). On December 13th and 17th of 2007, this rate had risen until 4.95 %;
• The Euribor 12 month’s rate increased on February 22nd, 2008 (4.25 % against 4.10 % on February 15th); it had fallen to 4.29 % on January 23rd having reached 4.89 % on December 17th, 2007;
• The long-term interest rate (OAT 10 years) is increasing slightly to 4.12 % on February 22nd (against 4.13 % on February 15th). It was 4.25 % at the beginning of the year and had risen to 4.70 % in July, 2007.It is a decline of 0.53 in 7 months;
   

We shall note that the American interest rates confirm their falling tendency.

• The interest rate in 30 years is 4.52 % on February 22nd, 2008. We note that the long-term interest rates in the United States meet a spectacular decline for some months: in June, 2007, the rate in 10 years was 5.20 % and the rate in 30 years was 5.32 %, they are in decline of 1.07 % and 0.68 %.
• As for the European financial markets, these declines of the long-term rates are connected to lighter perspectives of the economical growth: crisis of financial markets and bad performance of the American stock markets.