Further ECB rate hikes before the end the year...

[fixxation]

Hi all.

I read this article on Reuters the other day, that the ECB could potentially have three further rate hikes of 50bp each before the end of the year:

New ECB tool allows three big rate hikes in 2022-Deutsche Bank

The European Central Bank's decision to create a new tool to contain strain in euro area bond markets paves the way for it to deliver three, 50 basis point interest-rate increases this year, according to Deutsche Bank.

www.reuters.com

It appears this refers to the "Deposit facility" rate.... if this actually happens though, does anyone know if it's the likely that the "fixed rate tenders" rate that the trackers follow would also move to the same degree? If this is the case, trackers could quickly have 1.75% added to the current margin very quickly, which is a bit unsettling.

Thanks.

 

[lomber]

Expect 4.5 on trackers by end of next year . Personally I think the rate needs to be more to put a brake onto inflation. Maybe up to 6%. In the US they are thinking mortgages need to go to 8 to apply sufficient braking to the economy to halt inflation.

 

[Paul O Mahoney]

Hi all.

I read this article on Reuters the other day, that the ECB could potentially have three further rate hikes of 50bp each before the end of the year:

New ECB tool allows three big rate hikes in 2022-Deutsche Bank

The European Central Bank's decision to create a new tool to contain strain in euro area bond markets paves the way for it to deliver three, 50 basis point interest-rate increases this year, according to Deutsche Bank.

www.reuters.com

It appears this refers to the "Deposit facility" rate.... if this actually happens though, does anyone know if it's the likely that the "fixed rate tenders" rate that the trackers follow would also move to the same degree? If this is the case, trackers could quickly have 1.75% added to the current margin very quickly, which is a bit unsettling.

Thanks.

While inflation is now rampant I doubt very much the ECB would be hiking rates at this level, it would kill the meagre economic growth forecasts ,but these are not normal times and while 50bps are already factored in the effects of that will take time to filter through.

 

[unknowninsider]

While inflation is now rampant I doubt very much the ECB would be hiking rates at this level, it would kill the meagre economic growth forecasts ,but these are not normal times and while 50bps are already factored in the effects of that will take time to filter through.

The markets are forecasting base rate rises of 1.35 percentage points by year end. And near 3% by middle of next year.

The current mortgage pricing makes no sense (i.e. too low) given these market forecasts.

 

[lomber]

US 30 year treasuries are yielding something like 3.2% and 30 year mortgage rates are 6%. All Central Banks want to ensure their currency doesnt depreciate importing inflation therefore the ECB has no choice but to tighten to slam the breaks on and push the economies into recession and possibly depression

 

[unknowninsider]

US 30 year treasuries are yielding something like 3.2% and 30 year mortgage rates are 6%. All Central Banks want to ensure their currency doesnt depreciate importing inflation therefore the ECB has no choice but to tighten to slam the breaks on and push the economies into recession and possibly depression

To be balanced, I don't any party is in favour of a depression as that will be a function of runaway inflation rather than higher interest rates. I do agree that a period of no, or low negative, growth is the target... the unknown is how poorly the central banks manage their future interest reactions to that economic risk when is arises

 

[RichInSpirit]

"Further ECB rate hikes before the end the year..."

The first ECB rate hike hasn't happened yet to the best of my knowledge.

 

[fixxation]

The first ECB rate hike hasn't happened yet to the best of my knowledge.

Not yet, but very soon... it's planned for July and will be 0.25%, as announced in the news a couple weeks ago. What's coming *after* that is more what I was interested in, and if it would affect the fixed rate tenders rate... hard to know how high it will go by the end of the year.

 

[peemac]

"Further ECB rate hikes before the end the year..."

The first ECB rate hike hasn't happened yet to the best of my knowledge.

ECB have stated very clearly that there will be a rate increase in July, September and a 3rd before the end of the year. So its effectively gospel at this point. July will be minimum 0.25%, some are suggesting 0.5%. September seems to be odds on for 0.5%.

Personally I think the risk of recession will weigh on things too, but 2.5%-3% ECB within 12 months cannot be ruled out and probably is the favoured view of the market. But then possibly reverting back under 2%.

If only they could sort out the damned energy prices and that would take a lot of heat off the market. US Mid-term elections give us some hope.

 

[jpd]

Who are "they" that can sort out the energy prices?

Energy is widely traded on the world markets and the price is set by supply and demand - there is no one in charge

Groups of suppliers eg OPEC can try to manipulate prices up by restricting supply in the short term but in the long term the price is set by the overall demand and supply.

If a group of buyers eg EU, America and UK decide to boycott a major supplier, then this has the knock-on effect of reducing the supply and increasing prices until alternate supplies can be brought into use.

The quickest way to reduce energy prices would be to buy Russian gas and oil but ...