By Geoffrey Smith
Investing.com -- The European Central Bank will discuss raising its official interest rates by 50 basis points on Thursday, not just the 25 basis point rise it has flagged, Reuters reported on Tuesday, citing unnamed sources.
The report conflicts with the bank's guidance: at the time of its last meeting, the ECB said it intended to raise rates by 25 basis points at this month's meeting, and again in September. At the time, the only concessions it made to those wanting faster action to bring down inflation was to allow the possibility of a larger move at the September meeting.
Reuters' sources also said the governing council is closing in on a deal to provide help for indebted countries like Italy on the bond market if they stick to European Commission rules on reforms and budget discipline. Bond yield spreads have widened significantly within the Eurozone as the ECB's first rate hike in a decade has drawn near, with the volatility made worse by the fraying of the Italian government coalition.
The spread between the benchmark German and Italian 10-year yields has widened at times to over 250 basis points last week as Prime Minister (and former ECB President) Mario Draghi threatened to quit. However, it has stabilized at around 200 basis points since then, while the yield on the 2-year Italian note has come down from a high of 2.12% to 1.26% as of 3:50 AM ET (0750 GMT).
The euro , which fell below parity with the dollar for the first time in 20 years last amid fears that the ECB is behind the curve in fighting inflation, rose 0.8% on the news to its highest in nearly two weeks at $1.0220
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.