clearn.png
Thursday September 29th, 2022 7:54AM

European Central Bank to gather after borrowing costs rise

By The Associated Press
Related Articles
  Contact Editor

The European Central Bank’s rate-setting council will hold an unscheduled meeting Wednesday “to discuss market conditions,” with borrowing costs for several countries having risen after the bank said it would raise interest rates.

The bank last week announced the hikes in July and September without specifying how it would protect countries sharing the euro currency if borrowing costs rose excessively — as they did in the European debt crisis in 2010-2012. That's a potential concern for heavily indebted governments, most notably Italy.

The spreads for Italian and Spanish debt over safe German government debt — a key fear index for the 19-country eurozone — have risen after the ECB made only unspecific promises to prevent financial “fragmentation,” or interest rates in individual countries that are so high that they don’t reflect the bank’s benchmarks.

The ECB has a bond-market backstop in which it could step in and buy the debt of a troubled country. That tool helped calm the debt crisis a decade ago after the bank announced it in the wake of its then-President Mario Draghi’s promise to do “whatever it takes” to keep the eurozone from breaking up. But that program, which never actually had to be used, can come with tough conditions for reform and governments may be reluctant to turn to it.

Holger Schmieding, chief economist at Berenberg bank, said the “situation today is different from the euro crisis a little more than a decade ago” because countries have improved growth prospects and the ECB has the bond-market backstop in its back pocket if needed.

Current conditions “should not present an imminent risk even for fiscally challenged Italy,” he said.

Interest yields on Italy's 10-year government bonds have risen from around 1.2% at the start of the year to 4.1% on Wednesday. The ECB's pandemic support programs, including 1.7 trillion euros ($1.8 trillion) of bond purchases, helped keep government borrowing costs low across the eurozone. That program, however, came to an end in March, and markets are now looking at increases in interest rates from record low levels.

The ECB's surprise meeting comes the same day that the U.S. Federal Reserve is expected to announce its largest interest rate hike since 1994. Europe's bank has trailed the Fed and other central banks in raising rates to combat decades-high levels of inflation, including the Bank of England, which has hiked rates four times since December and will meet again Thursday.

But now the ECB has scheduled rate increases for July and September and indicated September’s increase might be a larger-than-usual half-percentage point.

  • Associated Categories: Associated Press (AP), AP Business, AP Business - Economy, AP Business - Industries, AP Business - Financial Services
© Copyright 2022 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
Russia's economic forum to be far smaller but moves forward
Russia’s showpiece investment gathering begins Wednesday, and organizers are telling foreign participants to be sure to bring cash — not necessarily for making investments, but for spending money
4:57AM ( 6 minutes ago )
European Central Bank to gather after borrowing costs rise
The European Central Bank’s rate-setting council will hold an unscheduled meeting “to discuss market conditions” as borrowing costs for several countries have risen after the bank said it would raise interest rates
4:45AM ( 18 minutes ago )
UK vows more Rwanda deportation flights after legal setback
The British government is vowing to organize more flights to deport asylum-seekers to Rwanda after a last-minute court judgment grounded the first plane due to take off
4:43AM ( 20 minutes ago )
Associated Press (AP)
Study: Facebook fails to catch East Africa extremist content
A new study has found that Facebook failed to catch Islamic State group and al-Shabab extremist content in posts aimed at East Africa as the region remains under threat from violent attacks and Kenya prepares to vote in a closely contested national election
2:59AM ( 2 hours ago )
Asian stocks mixed ahead of Fed rate hike decision
Asian stock markets are mixed ahead of the Federal Reserve’s announcement of how sharply it will raise interest rates to cool U.S. inflation
2:43AM ( 2 hours ago )
China's factory activity rebounds as anti-virus curbs ease
China’s factory output rebounded in May, adding to a recovery from the latest economic slump induced by COVID-19 curbs
1:46AM ( 3 hours ago )
AP Business
Mills, LePage look ahead to November in Maine governor race
Former Maine Gov. Paul LePage is seeking a political comeback
8:03PM ( 9 hours ago )
Biden to visit 'pariah' Saudi Arabia and Israel next month
President Joe Biden will make his first trip to the Middle East next month with visits to Israel, the occupied West Bank and Saudi Arabia
6:23PM ( 10 hours ago )
Biden focuses on workers as high inflation remains a risk
President Joe Biden has told the largest federation of labor unions that he’s rebuilding the U.S. economy around workers
5:52PM ( 11 hours ago )
AP Business - Economy
Russians control 80% of key Ukraine city, cut escape routes
A governor says Russian forces control about 80% of the key Ukrainian city of Sievierodonetsk
5:51PM ( 11 hours ago )
The S&P 500 is in a bear market; here’s what that means
Wall Street opened the week with heavy losses that put the benchmark S&P 500 at a level considered to be a so-called bear market
12:52PM ( 16 hours ago )
Russia lowers gas flows to Europe with part stuck in Canada
Russian state-controlled energy giant Gazprom says gas deliveries through a key pipeline to Europe will drop by around 40% this year
12:44PM ( 16 hours ago )
AP Business - Industries
World shares wobbly after Wall Street sinks into bear market
Global stocks have drifted lower in the wake of Wall Street’s tumble into a bear market
7:18AM ( 21 hours ago )
World shares steady after Wall Street sinks into bear market
Shares have opened mostly higher in Europe after Asian shares recovered from the worst of their losses following Wall Street's tumble into what’s called a bear market
5:55AM ( 23 hours ago )
Wall Street slips into a bear market; here’s what that means
Wall Street opened the week with heavy losses that put the benchmark S&P 500 at a level considered to be a so-called bear market
2:17AM ( 1 day ago )
AP Business - Financial Services
Russia's economic forum to be far smaller but moves forward
Russia’s showpiece investment gathering begins Wednesday, and organizers are telling foreign participants to be sure to bring cash — not necessarily for making investments, but for spending money
4:57AM ( 6 minutes ago )
UK vows more Rwanda deportation flights after legal setback
The British government is vowing to organize more flights to deport asylum-seekers to Rwanda after a last-minute court judgment grounded the first plane due to take off
4:43AM ( 21 minutes ago )
Laxalt's Nevada win sets up fierce race for Senate control
Adam Laxalt, a former state attorney general who has embraced lies about the 2020 election, has won the Republican nomination for a pivotal Nevada Senate seat
3:47AM ( 1 hour ago )
Election 2022 Takeaways: Big Trump win, Nev. Senate race set
Donald Trump has notched a significant victory in South Carolina, where his preferred candidate made five-term Rep. Tom Rice the first Republican to be booted from office after voting to impeach the former president last year
3:45AM ( 1 hour ago )
Gonsolin earns 8th victory, Dodgers edge Angels 2-0
Tony Gonsolin tossed 6 1/3 strong innings, Mookie Betts hit his 17th home run and the Los Angeles Dodgers held off the Los Angeles Angels 2-0 in their Freeway Series opener
3:37AM ( 1 hour ago )