Rumors about a possible 50 basis point hike by the ECB boost the euro and banks

MADRID, 19 Jul. (EUROPA PRESS) -

The information circulating this Tuesday about the possibility that the Governing Council of the European Central Bank (ECB) discusses at its meeting on Thursday a rate hike of 50 basis points instead of limiting itself to the increase of a quarter of a point promised a month serve as a stimulus to the price of the euro against the dollar, as well as to that of the banks in the eurozone.

In this way, the exchange rate of the euro against the 'greenback', which during the past week came to be below the dollar, rose this Tuesday to a maximum since the beginning of July, reaching 1.0269 dollars per euro.

In turn, the Euro STOXX index of banks rose more than 4%, led by increases in Spanish and Italian banks. Specifically, Caixabank recorded a rise of 6.52% and Unicredit 6.14%, while Sabadell advanced 5.94%, followed by the German Commerzbank (5.81%); Bper Banca (5.23%) and Intesa Sanpaolo (5.20%).

According to anonymous sources familiar with the situation cited by Bloomberg, the ECB could consider a higher rate hike than anticipated due to worsening inflation, which in June climbed to a record 8.6% in the euro zone.

Likewise, the Reuters agency, also citing anonymous sources with knowledge of the situation, pointed out that the discussions on whether the rate hike will be 25 or 50 basis points was still open.

At its meeting last June, the ECB announced that it would raise interest rates by 25 basis points in July, the first rise in the reference rate since 2011, as well as opening the door to an even higher rise in September depending on of the evolution of the inflation outlook.

During the last month, in their different public appearances, the president of the ECB, Christine Lagarde, and the vice president of the ECB, Luis de Guindos, have insisted that the rise in July will be 25 basis points.

However, in one of her interventions at the end of June, Lagarde recognized that there are conditions in which gradualism in the normalization of the ECB's monetary policy would not be appropriate, as in the case that higher inflation threatened to unpin the inflation expectations, or there were signs of a more permanent loss of economic potential that would limit the availability of resources, forcing the ECB to withdraw its monetary accommodation more quickly.

Bank of America analysts already pointed out last week that a rate hike of more than 25 basis points this Thursday "is unlikely, but not unthinkable", although the US bank considered as a preferred scenario that instead of a higher rate hike expected, Lagarde in the subsequent press conference "leave the door wide open to more than 50 basis points in September".