Sunday, December 5

The Euribor collapses due to the inaction of the ECB


The Euribor, the index to which most mortgages are referenced, it has lost 12.42 percent since November began. The indicator was supported by the inaction of the Banco Central Europea (ECB) to re-drill daily lows.

In this way, the Euribor reached -0.501 percent on Monday, after falling 1.21 percent. But the biggest declines were recorded on November 2 and 3, with falls of over 4 percent.

With these descents, the monthly average of the Euribor so far in November stands at -0.48 percent, below the closing of October, when it stood at -0.472 percent, which would allow it to close at levels similar to those of November 2020, when the Euribor ended at -0.481 percent.

Finally, if the Euribor closed higher in November, it would allow the indicator to break a streak of two consecutive rises.

Again, the key is the ECB

The policy of the ECB continues to be decisive for the evolution of the Euribor. In this way, the index began a strong comeback, which led it to mark 0.443 percent due to the possibility that the ECB would change its discourse.

However, the intervention of the President of the ECB, Christine Lagarde, insisting once again on the temporality of inflation and on her prediction that the path of declines would begin as of next year gave sufficient reasons for the Euribor to return to the come down.

The dilemma facing the ECB is having to decide between controlling the rise in prices (which already reached 4.1 percent in the eurozone in October) or jeopardizing a recovery, which is not yet established. .

A) Yes, What can be expected at the next ECB meeting, which will take place on December 16, is that the official announcement of the tapering, to put an end to purchases in March 2022. As for the rate hike, although the market indicates that it could start in 2022, Lagarde herself ruled out these days that the necessary conditions exist to do so.

The deposit facility will be the first indication of the rise in the Euribor

However, it will be very difficult for the Euribor to keep rising if the deposit facility, the money that the ECB charges banks for having deposited their money in it, remains anchored at -0.50 percent.

A) Yes, Bankinter expects the Euribor to remain at levels similar to current ones at the end of the year. Only the end of the pandemic purchasing program, known by its acronym in English as PEPP, could make the indicator rebound, but not enough to leave negative territory. It would be, therefore, according to experts, at -0.32 percent.

Finally, the Euribor would remain below 0 percent for another year: by the end of 2023, anticipating the rate hike for 2024, it would end at -0.18 percent.

The Bank of England surprise

The truth is there is a division between central banks and markets. The rise in prices, without control over energy, makes the markets think that central banks will be more aggressive than they imply.

Thus, while the Fed has started tapering, with the reduction of 15,000 million dollars in purchases per month, It is still suffering when it comes to confirming when interest rates will rise, which everything indicates that it will be in December 2022. However, the markets predict that the first increase, of a total of two, will be advanced to June.

Meanwhile, the Bank of England resisted being the first to walk down that path, when at last week’s meeting it surprised the market by not carrying it out, even though it was already discounting.



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