full wave important meeting investor panic around banking. European Central Bank board of directors (AMB) will hold its scheduled meeting this Thursday to decide whether he will return. raise ratesYes, but in a context unimaginable just a week ago. America’s Fall Silicon Valley Bank It caused shock waves in the stock markets that have shaken the country once again for years. battered Credit Suisse Shaking prices of Helvetic and world banks. ghost one Financial Crisislike this, put pressure monetary authority of the eurozone in its struggle against inflationary spiralmost analyst organisms it will be more expensive money, as planned. Another thing is that they see it as a good decision.
The ECB therefore forecasts that it will raise interest rates for six weeks. 0.5 more points percentage points at their meeting this Thursday, where the main breed will rise at 3.5% (highest since October 2008, the dawn of the previous crisis), deposit facility – interest paid on money held by banks, which is most relevant in the current context at 3%. It also announced that it will approve it in the coming months. new walks types. “We still have a a long way to goWe know it’s not over,” said the president. Christine Lagarde.
Some experts believe that stretch surrounding Banking sector It can get the ECB to approve lowering (0.25 points) and even leave the odds unchanged. No deal about. “Suddenly, the 50 basis point rise that the consensus expected for the March ECB meeting seems like a move. increasingly less likely. The fallout from the Silicon Valley Bank bankruptcy led to a drastic downward revision in US interest rate expectations, and some of it spilled over into the ECB. This is a very close topic, but we believe that will probably continue 50 basis points gain,” Abrdn chief economist Paul Diggle was able to sum up.
Why is this 0.5 point increase the most likely scenario? First of all, because unusual announcement It was a result of the increase in agreement Between the two spirits of the ECB’s governing council: ‘hawk’ governors (more orthodox) Agreed to cut the rate increase from 0.75 to 0.5 points at the February meeting. “pigeons”, in return new upload announcement in March. However, the announced increase was not approved. shade to doubt about actual state of the system The European banking system is the message the authorities are trying to send is that their situation There’s nothing to do this caused the SVB to drop.
the tone of the message
What remains is whether Lagarde exists. keep the tone hard considering the recent statements about the expectation of new interest rate hikes or the declining tension of the banks. “It will be interesting to hear your words. markers about their decisions upcoming meetings and the pace of future rate increases, 25 or 50 basis points. HE ECB remains under pressureBecause the fight against inflation far from earned“, said Franck Dixmier, Director of Fixed Income Investments at Allianz Global Investors.
This inflation Eurozone, well, let me small space for action to the central bank. Overall slowed to 8.5% in February, but underlying (no power or food) went to a new place all-time high 5.6% Also, economy and employment It is performing better than expected, which adds to the pressure from the ECB to make the coin more expensive. further cooling the economy and lowering prices. HE main task The central bank’s aim is to 2% in the medium termwhile financial sector stability This is another of his duties but he subordinate to the principle of controlling prices.
In December, the ECB calculated that GDP would only increase by 0.5% this year. Average inflation will fall to 6.3 percent and the underlying will rise to 4.2%. This Thursday will update forecasts and possibly improve GDP and general inflation forecasts, but worsen the prognosis For the core, another factor pressing for monetary policy tightening. Conversely, a possible banking crisis could cause him to take his foot off the accelerator as problems in the industry cut loans and make them more expensive, damaging the economy and thus creating a deflationary effect.
bank status
Some analysts argue, therefore, that new ECB rate hikes may make sense. serious mistake, because the cost of a banking crisis can be much higher than the cost of inflation. In particular, the decline of the SVB was partly hidden losses On public debt portfolios caused by accelerating rate hikes to combat the Federal Reserve’s price spiral.
However, due to the business model, supervision and regulations, European banking is very different American Single But, yes, it is known how the financial crises started, but not how they ended. results are unpredictable. “We do not believe that events in the US have had an impact on their own. systemic risk We do not consider it to be a fundamental basis for Europe. infection. But because of irrational behaviorThe detrimental effects of herd mentality and aggressive short-seller actions on the affected institutions cannot be ignored,” said Marco Troiano of Scope Ratings.