clash in the ECB on the new increase. The impact of bankruptcy of the SVB (and the risks)

The rift was already there. But the unexpected banking earthquake with epicenter in the Silicon Valley it was also felt in Europa, making the opposing positionings in Frankfurt more evident. With the result of injecting at least a little uncertainty into a scenario that until a few days ago seemed very definite. In tomorrow’s monetary policy meeting, the most probable hypothesis remains that of a half-point increase in interest rates Bce. But there is now another possibility on the table: a halved move, only 0.25, which would signal the acknowledgment of a changed situation. Deutsche Bank analysts are in favor of this second option, while highlighting that in the end much will depend on the ability of the financial markets to absorb the tensions that have spread from California.

Crac Silicon Valley Bank, here’s what happened in the US. The differences with Europe and the risks for savers

THE CALENDAR

But beyond the immediate choice, the real clash is perhaps over the message that will be given for the future, in terms of language and that of economic forecasts. Last week the hawks of the Governing Council, taking the next decision for granted, pressed for the definition of an all-uphill calendar. Robert Holzmann, head of the Austrian central bank, had gone so far as to suggest the need for another three moves from 0.50 in as many successive appointments, in order to bring the deposit rate to 4.5 per cent and the reference rate to 5 That is, arrival points higher than those discounted by the markets. Holzmann had thus attracted the observations of Ignazio Visco, who had recalled the opportunity to decide from time to time what to do, given the situation of great uncertainty. And he had added that he did not appreciate “the comments of colleagues on prolonged future hikes”. Together with the governor of the Bnaca d’Italia, Fabio Panetta, an Italian member of the executive committee, is also in a cautious position. But other council members have also used prudent words in recent days: for example the Portuguese Mario Centeno. While among the supporters of the hard line against inflation, in addition to Holzmann, there are Joachim Nagel, number one of the Bundesbank and the governors of the central banks of Holland and Belgium, Klaas Knot and Pierre Wunsch.

In the middle, with the task of summing up, there is of course the president Christine Lagarde. Eventually, it will be up to her to make the markets understand that music is destined to change. As highlighted by many observers, the will to rebuild the credibility of the ECB has also weighed on the decisions of the last few months, a bruised exit from the long phase in which Frankfurt (actually not alone) was trying to get the message of an inflationary flare across temporary, linked only to the sharp rises in energy prices. Those prices which have now reversed course, however leaving upward pressure on other goods and services in the field: particularly stubborn and therefore to be countered according to the hawks. Also to prevent the famous spiral between prices and wages from materializing, of which, however, we see little sign at the moment.

WORRIES

If so far the doves’ worries were about the impact of the hikes on the real economy, and therefore about a possible recession, now there are new facts that can be used as further arguments in the negotiations that will take place on Thursday. The bankruptcy of the Svb risks penalizing European credit institutions to a greater extent, despite the more reassuring regulatory context on paper, because the actual possible channels of contagion have yet to be thoroughly explored. And above all because in the meantime the American authorities have moved decisively. Not only by announcing enhanced depositor protection and suggesting a slowdown, if not a halt, in the Fed’s hikes (Nomura analysts even go so far as to speculate on a 25 basis point cut at next week’s meeting) but also setting up a program that will grant the stars and stripes banks liquidity on favorable terms. The gap between the two sides of the ocean risks becoming dangerous at this point: this is why the European central bank could be induced to make a type of choice towards which it has shown little inclination throughout its history. In other words, acknowledging that the situation has changed and adapting one’s position quickly and flexibly.

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