The “ad hoc” board meeting comes on the same day that the Federal Reserve announces a political decision, with many expecting interest rates to rise by 75 basis points. Read: In the “fragile” financial markets in view of the Fed decision, some traders and strategic analysts see the risk of an immediate recession ECB talks expected to focus on rising ECB lending costs in Europe, especially since the central bank announced at its recent meeting in June that its key interest rate would rise by 25 basis points in July and probably 50 basis points in September. The ECB also said it would close the remaining monthly asset purchases on July 1. The yield on Italy’s 10-year bond TMBMKIT-10Y, 3.922%, fell 27 basis points to 3.894% on Wednesday, but this is in contrast to an increase that has reduced it from 1.195% at the beginning of the year. The yield on the 10-year bond TMBMKDE-10Y of Germany, 1.748% fell 4 basis points to 1.71%, from about -0.05% at the beginning of the year. The yield on the 10-year government bond TMBMKES-10Y of Spain, 3.027% fell 5 basis points to 2.995%. The EURUSD, + 0.63% rose 0.6% to $ 1.0479, although the common currency has lost 2.3% so far this year. The rare emergency meeting comes a day after ECB board member Isabel Schnabel said the bank would combat the so-called fragmentation of borrowing costs within the bloc, which “go beyond fundamentals and threaten the transmission of monetary policy”. The bank has traditionally counteracted regional bond yields that stray from bond alignment, something that has emerged dramatically since the bank’s meeting in June. When they persist, they “complicate monetary policy as they create a wedge between risk-free interest rates and national lending conditions,” Schnabel said, adding that the bank would respond to “new emergencies with existing and potentially new tools” without to offer specific details. . “With memories of the European debt crisis still fresh, investors are asking how and under what circumstances ECB President Christine Lagarde would deliver on her May 23 blog post to act against ‘excessive fragmentation’ if required after end of the network. asset markets, “said Holger Schmieding, chief economist, and Kallum Pickering, senior economist at Berenberg, in a note to clients. “Planning a gentle landing for economies hit by external shocks and experiencing the highest inflation in decades will be as difficult as it sounds for all the major central banks. “The additional challenge for the ECB is that its policies affect lending costs in 19 economies with different fundamentals.” At the moment, the bank needs to answer two key questions to avoid the risk of further turmoil across the bloc – what exactly tools is it prepared to use to deal with this “excessive fragmentation” and what is the limit for its use? , economists said. The eurozone is battling inflation that is causing nosebleeds due to the effects of the pandemic and the unexpected and destabilizing Russian invasion of Ukraine in late February. The biggest war on European soil since World War II does not seem to be over, as the conflict has pushed up the prices of energy and other commodities. In May, German inflation jumped to its highest level in almost half a century due to higher food and energy prices. The ECB acknowledged these price hikes at its recent meeting, pledging to ensure that inflation returns to the 2% target in the medium term. The central bank has forecast that annual inflation will rise to 6.8% in 2022, falling to 3.5% in 2023 and 2.1% in 2024 – higher than in March forecasts.
