Morning Bid: ECB’s Time To Hike, Italy’s Time For More Instability.

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A look at the day ahead in markets from Tommy Wilkes.

If the European Central Bank’s inflation headache wasn’t bad enough, its first interest rate rise since 2011 will land on the day the government of its third-largest member state, Italy, looks set to collapse read more .

Mario Draghi’s time as prime minister is likely over after his coalition partners refused to heed his call for unity. Stocks have fallen and Italian borrowing costs are rising — a worry for an ECB desperate to contain market stress in its most indebted members.

Now investors are waiting for the bigger, if less dramatic, event of the day.
With sources this week said the ECB was weighing up a 50 basis-point rate increase rather than the 25 earlier flagged, a greater degree of uncertainty has crept into the meeting.
The other question is what detail the ECB might provide on a planned tool to contain bond market stress. Italy’s latest turmoil makes that task all the more urgent read more .

The ECB may look with some envy at the Bank of Japan which earlier maintained ultra-low interest rates; and signalled its resolve to remain an outlier in the policy-tightening wave.


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