Posted on July 19, 2022 This week the ECB is expected to raise interest rates for the first time in eleven years, coinciding with political instability in Italy. Mario Draghi is due to address Parliament tomorrow, so volatility is expected to remain high until then, in response to various rumors as to whether he will stand firm on resigning from him, or whether he is willing to remain in his Market Stall. Any indication that could increase the probability of early elections will be negative for Italian debt and will cause its premium to rise. The timing of the current political crisis in Italy does not benefit the country, as some members of the ECB Governing Council could decide against further support for Italian bonds if the increase in the risk premium is due to political causes and no to the tightening of accommodative monetary policy. The ECB is also expected to announce details of a new anti-fragmentation tool to contain stress in sovereign bond markets. Regarding the rate hike, the agency has already announced a 25 bps hike for this Thursday and the money markets forecast a 35% chance of a 50bps hike, compared to 40% on Friday. The markets expect a tightening of 160 bps by the end of the year, which implies that a rise of at least 50 bps could occur in one or more of the next four meetings of the entity. INFORMATIONTitleThe political crisis in Italy and the ECB meeting, key events of the week in EuropeDescriptionThis week the ECB is expected to raise interest rates for the first time in eleven years, coinciding with the political instability in Italy. Author GLOBALCAJA