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The budget dispute between Italy and the European Commission is holding back speculation about a rise in ECB rates on the money market. It is now expected that the European Central Bank (ECB) will raise one of its key interest rates only in October 2019. In contrast, the chances of a ten-year move base points in September 2019 are now considered significantly lower. Investors are now increasingly likely to see the ECB slow its planned exit from ultra-soft monetary policy due to the fiscal conflict.
So far, the ECB is willing to end its purchases of $ 1 billion bonds in order to support the economy by the end of December, as economic recovery is now firmly established. It does not want to shake its interest before the summer of 2019. Its key rate is at a record 0.0% since March 2016. The deposit rate is equal to minus 0.4%. This means that banks have to pay penalty interest when they deposit money in the central bank.
Concerns over Italian public finances continue to disrupt investors in the bond market: Italy's 10-year yield rose seven basis points to 3.74% on Friday, its highest level since February 2014. The risk premium on comparable German bonds is 336.4 basis points the lowest since the European debt crisis of 2012. In a letter, the European Commission gave Italy a deadline of Monday to respond to concerns about the draft budget.
(APA / Reuters)
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