MILANO – It’s time for big changes in the ECB house: squeezed between an economy that slows down due to the war in Ukraine and the price rush, as just outlined by the OECD, the Eurotower is preparing to announce the first rate hike (expected in July) and the end of the purchases of titles. Mix on the table of the governors, on tour in Amsterdam, who will also have to fire the new growth and price estimates. Based on these, outline the moves of the future: for now, the indication of the end of the purchases is expected (through the App program), while the real actions on rates are scheduled for next month. The goal outlined by the president is to reach zero interest rates (today we are at -0.5 for that on deposits) in the third quarter of the year: the market assumes that in July there will be the first squeeze: the hypothesis more accredited is a series of gradual increases from 0.25, but there is no shortage of “hawks” which also provide a squeeze from half a point in a single stroke as early as July.
According to Barclays, for example, the central bank will give a 0.25 point squeeze in each meeting from July to December, including a further hike in the first quarter of 2023. As for purchases, the stop should be enacted by the end. in June (or with a possible additional 5 billion euro for the first week of July). Also in Abn Amro they have accelerated the estimate of increases, which previously was for only two moves between July and September and now instead extends to the beginning of next year, as for the English bank, arriving to estimate rates at 0.75% in the first part of 2023. There are many obstacles on the way. Obviously, war will be a concern that Lagarde will take into account, as will the issue of energy prices and the food crisis. The reaction of the markets should not be underestimated. Precisely for this reason, in recent days, there has been talk of a “plan” that the ECB could adopt to try to keep the spreads of peripheral countries under control, in the event that the monetary tightening were to cause them to widen in a worrying way: on its side it has the weapon of flexibility in reinvesting the securities in the portfolio that come to maturity.
There is also expectation on the markets for data on consumer prices in the United States, which will be released tomorrow and which the White House has already said it expects “high”. The secretary to the Treasury, Janet Yellen, said 8% inflation is “unacceptable”. Weak futures up Wall Streetfresh from a lower close as 10-year Treasury rates rose above 3%.
The Asian stock exchanges are all in decline except Tokyo. The Hang Seng of Hong Kong started trading up and then turned negative, and is now losing 0.65%. The stock market fell Shanghai which falls by 0.92% while Shenzhen loses 1.65%. Seoul was also negative with -0.44%. In contrast, the Nikkei index which in Tokyo gained 0.26%.
Prices of Petroleum little move, close to 13-week highs, on Asian markets, after China recorded stronger-than-expected exports in May (+ 16.9% with trade surplus at 79 billion), although Shanghai’s new restrictions have limited earnings. Brent futures for August delivery rose 0.39% to $ 123.93 a barrel while US WTI crude for July delivery gained 0.20% to $ 122.34 a barrel. Both benchmarks closed yesterday at their highs since March 8, matching the levels seen in 2008.