ECB Hikes Benchmark Interest Rate By 0.25% From 1.25% To 1.50% As Expected, Likely Top For Now

Tyler Durden's picture

The fully priced-in rate hike has come and gone, with the ECB raising the benchmark interest rate from 1.25% to 1.50%. Now the question is what happens next: at 8:30 am is the Trichet press conference which we will carry live. Everyone will wonder if this is the end of the hiking cycle, which it almost certainly is as any more hiking will cause a full blown collapse within the PIIGS countries. If so, look for the market to promptly sell the news.

Full release:

 

PRESS RELEASE

7 July 2011 - Monetary policy decisions

At today’s meeting the Governing Council of the ECB took the following monetary policy decisions:

  1. The interest rate on the main refinancing operations of the
    Eurosystem will be increased by 25 basis points to 1.50%, starting from
    the operation to be settled on 13 July 2011.

  2. The interest rate on the marginal lending facility will be increased by 25 basis points to 2.25%, with effect from 13 July 2011.

  3. The interest rate on the deposit facility will be increased by 25 basis points to 0.75%, with effect from 13 July 2011.

The President of the ECB will comment on the considerations
underlying these decisions at a press conference starting at 2.30 p.m.
CET today.

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TooBearish's picture

Short term rate hikes have no effect on PIIGs Ty - they locked out of marekt or paying way off market - comon

A Man without Qualities's picture

Not true - there's a lot of debt, including mortgages that are tied to Euribor...

Quintus's picture

Correct.  This will have an immediate and negative effect on people in Ireland and Spain particularly who are struggling to pay mortgages.  Almost all mortgages in these countries are variable rate and the impact of this rate increase will be felt in their repayments immediately.

Too much more of this insanity and the ECB will set off another wave of mortgage defaults for which the banks are woefully unprepared.

The Swedish Chef's picture

If you have a problem paying your mortgage at present rate you shouldn´t have bought the friggin´ house. Financial responsability, bitchez!

Quintus's picture

I don't disagree with you, but if (as the ECB does) you have a remit to ensure the stability of the Eurozone banking system, inflicting the probable damage on parts of the banking system that this interest rate increase is likely to cause, doesn't seem all that clever.

Furthermore, with the populations of the PIIGS already smarting at the pillaging of their pensions and savings to prop up the banks, largely for the benefit of safeguarding the Eurozone project, loading extra costs onto them in the form of higher mortgage payments to the very same banks seems politically dangerous and stupid.

Transitory Disinflation's picture

+1000

 

The same goes for the UK "mortgage payers".  Only Aus and UK have yet to have their house price crash however with TPTB holding so many rental properties they will never let the crash commence.  Mervyn King must own quite a few properties thus no interest rate rises!

 

Transitory Disinflation's picture

+1000

 

The same goes for the UK "mortgage payers".  Only Aus and UK have yet to have their house price crash however with TPTB holding so many rental properties they will never let the crash commence.  Mervyn King must own quite a few properties thus no interest rate rises!

 

Overflow-admin's picture

Yeah you should have been in little Bernank's sockets so he could have told you that there was a subprime crisis coming.

 

Oops, he actually failed.

GeneMarchbanks's picture

Non-event unless this is just the beginning of a hiking series. I call shananigans, merely bluffing.

augie's picture

And the /es is right back up to may high.... Lol i can't stop laughing it's all so hysterical. 

entendance's picture

Nothing will save these clowns in Frankfurt.
Does anyone really believe the Euro is going to even exist in its current form a year from now?
http://www.entendance.com/forums/viewtopic.php?f=6&t=784&p=17982#p17968

ziggy59's picture

on Bizarro World, sell is buy, so, markets are good for 100 point pop, no? just in time to dismiss a miss on the UE numbers.

Rikki-Tikki-Tavi's picture

I would think PBOC and ECB will continue until the commodity complex gives in.

Diplodicus Rex's picture

Never mind, "I actually believe, in spite of all the challenges, all the difficulties, that the seeds of success are being planted.", said Mr Charles Dallara of theGreek situation according to Pravda: http://www.bbc.co.uk/news/business-14045159

 

And in true Doublespeak TM "Everyone recognises it is in the interests of all stakeholders to seek a voluntary solution."

 

Mr Dallara is "head of the lobby group" IIF (Institute of International Finance) consisting "The IIF represents insurers and other financial firms as well as banks including BNP Paribas, Deutsche Bank, HSBC and Societe Generale."

 

Nothing to see here, move along.

MFL8240's picture

The show must go on!

Caviar Emptor's picture

The real risk: creating a generation or two of anti-consumerist, anti-globalist rebels. They're shuddering in bank board rooms

hourglass86's picture

Germany errrrr sry.... i mean ECB annihilates PIIGS.

jm's picture

I'm amazed at how even large GDP countries have no say in EU monetary policy decisions, especially when they have so much to lose.

Bureaucrats are the world's greatest danger.