Edited by Sergio Silvestri

The ECB's rate hike is only a matter of weeks: likely at its July meeting. Many, most recently Francois Villeroy de Galhau, Governor of the Bank of France, have highlighted the growing consensus on this issue. Bank of Italy Governor Ignazio Visco reiterated that "with medium-term inflation expectations of 2%, we can raise rates as early as this summer. It is important that this be done gradually, especially given the many uncertainties stemming from the very serious crisis in Ukraine." Visco stated, "The risk of deflation is behind us: we have kept official interest rates negative for a long time to address these risks and to respond to the pandemic's effects on demand, consumption, and investment."

Regarding BTPs, for the first time since October 2018, the 10-year bond exceeded the 3% threshold, reaching 3,2%, in line with the rise in bond yields. The spread, however, is close to 208 basis points, with a higher risk premium than European bonds with similar maturities: the German bond pays an interest rate of 1,14%, the French one 1,66%, and the Spanish one 2,25%. Only the Greek bond is at 3,6%.

The cost of mortgages and other bank loans is also rising again. The latest Bank of Italy survey clearly shows a realignment of loan and mortgage rates toward higher levels. Mortgage rates are above 2%, their highest since August 2019, compared to 1,85% in February (we're talking about the APR, the rate that includes incidental costs). Based on a study of MutuiSupermarket and Crif “the banking system is progressively adapting its mortgage offerings, reflecting the observed trend of the IRS indices”. 

For consumer credit, however, rates on new disbursements are 8,06% and deposit rates are 0,32%. Interest rates on loans to non-financial corporations rose to an average of 1,23% from 1,09% in February. The Bank of Italy reports that credit demand from households and businesses remains strong, and loan growth accelerated to 2,5% over the twelve-month period from 2% the previous month. Loans to households increased at an annualized rate of 4% from 3,8% the previous month, while those to non-financial corporations rose to 1,3% from 1,2% the previous month.