What’s behind the continuous rise of the Euribor?
Since mid-October, Euribor, the most widely used index in mortgages, has only risen sharply. This is a slow but steady rise, which has already had its first effects. If in August, the index set a new low by closing at -0.35% in anticipation of the new expansive measures of the European Central Bank (ECB), in November it would close at -0.26%, that is, in just three months it has recovered nine tenths, despite the fact that expectations remain that the ECB will not raise rates until 2022.
Moreover, this recovery is taking place in the midst of a new programme of monetary expansion by the head of monetary policy in the eurozone. Since 1 November, the ECB has been buying back debt at a rate of 20 billion a month. And it is precisely the ECB’s new measures to wake up the eurozone economy that would explain this increase. Specifically the deposit facility. As XTB analyst Joaquín Robles recalls, although “the ECB lowered it to -0.5%” it established a tranche that would be exempt. Specifically, this volume was multiplied by six, a decision that aims to relieve the bank “helping it pay less for its excess liquidity,” explains Robles. In November, the Euribor hit -0.255%.
Does this mean that we will see a recovery of the benchmark? The answer is that the Euribor would already have reached its ground, according to Bankinter’s forecasts, which would place it at around -0.30% at year-end in its central scenario.
On the other hand, since 1 November, Christine Lagarde has been the new president of the ECB, which will head the Governing Council for the first time at its meeting on 12 December. However, Lagarde is expected to maintain a continuist policy, so her next decisions should not surprise the markets. In fact, at Mario Draghi’s last press conference as President of the ECB he already led the way by ensuring that rates would remain low for a long period of time and that the ECB was prepared to take the necessary measures should the macro situation deteriorate further. Here, the next macroeconomic data to be released in Europe will be decisive for the future decisions of the European institution, Robles recalls. .
In this sense, the market has speculated in recent weeks with an increase in monthly purchases or the possibility of lowering interest rates to negative ground, and for this to be seen in the evolution of inflation, which this year has fallen to 0.7%, far from the target of 2%, and could precipitate this type of measures.
For their part, Bankinter analysts expect a macro improvement that would allow the Euribor to recover, but would still close 2020 in negative: around -0.10%, in its central scenario. By 2022, the year in which the ECB would raise interest rates, the recovery of the Euribor would still be slow and could close negative, at -0.05%, although they do not rule out closing in tables around 0%.