The European Central Bank (ECB) will raise interest rates in July and then do the same in September. A decision that, in theory, benefits financial institutions but that the supervisor does not want to unleash euphoria in the sector. In this sense, Luis de Guindos, vice president of the institution, has called on banks to be “prudent” in this scenario and not be blinded by the “illusion” of a rate hike. This is how it was pronounced at the XXXIX APIE Seminar, with the title ‘Sustainability and digitization: the levers of recovery’, held in Santander.
De Guindos recalled that in July there will be a 25 basis point rise in reference rates, but that for September it has not yet been defined.
In fact, as the ECB has been doing these weeks, the vice president has stressed that the rise in the ninth month of the year will depend on the inflation data at that time, opening the door for the increase to be greater than in July.
Asked if the supervisor would even consider actions such as in the worst of the pandemic to restrict the dividend of banks or bonuses, De Guindos has stressed that they are prepared for any decision but that they are not in a scenario like that. Just as the risk premiums, which are so worrying at times, are not at the levels of 2012 in the midst of the financial crisis.
Thus, a few days ago the ECB held an emergency meeting of its governing council to convey to the markets the intention to act in the face of differences in the risk premium between the different countries of the euro zone, known as fragmentation, consistent in that it depends on where a family or company is located to pay more for borrowing.
The objective of the supervisor is to fight against this fragmentation in view of the fact that risk premiums in southern Europe, specifically in Spain, Italy, Portugal and Greece, have been increasing more than expected. That is why a relaxation of the reinvestments of the maturities of the pandemic debt purchase program was announced to act in the most vulnerable countries, in addition to the launch of the design of an anti-fragmentation plan, an anti-crisis plan.
Related to all this, De Guindos has pointed out that economic policy actions must “generate stability and be very credible”, while urging fiscal policy to act as an accompaniment to monetary policy. Because although the ECB in its central scenario foresees a slowdown in growth, in its adverse scenario it does speak of a recession in 2023, although the latter is not the one the institution is working on.
