ECB Raises Interest Rates for the First Time in 11 Years

The European Central Bank (ECB)’s Governing Council is expected to hold an in-depth and genuine discussion on the size of its first interest rate hike in 11 years on Thursday in Frankfurt, as the region’s cost of living remains persistently high.

 On Tuesday morning, Euro rose to a near two-week high as Eurozone bond yields increased. It was previously reported, citing a source, that the ECB would consider a 50 basis point rate hike instead of the already factored in 25 points.

 In a recent report, Mark Wall and his team at Deutsche Bank Research stated, “It is possible that the ECB wants the option of a 50bp hike because of something its has seen in the unpublished inflation expectations data.”

 He also mentioned a new stimulus program set to begin on Thursday, which will target soaring debt yields in peripheral countries like Italy.

 The specifics of this new anti-secession tool will be closely scrutinized at a critical juncture in Italy’s political history.

 Dirk Schumacher of Natixis said, “While ECB President Lagarde is likely to stress the temporary nature of the instrument, owing to the exceptional circumstances the euro area finds itself in, she will also underline the ECB’s determination to secure the integrity of the monetary union, thereby trying to evoke a ‘whatever it takes’ spirit.”

 Schumacher mentioned, given the political situation in Italy, President Lagarde will have to take a risk, which adds to ‘misunderstandings’ and unstable market movements.