The Euribor threatens to close September above 2% in the midst of the ECB's fight against inflation

Prices in the euro zone climb to a new record of 9.1% and the indicator to which most mortgages in Spain are referenced anticipates more aggressive rate hikes

CLEAR DAWN Madrid

There is no ceiling. The
price hike continues to put pressure on consumers' pockets and it is not a situation exclusive to Spain. As confirmed this Friday by Eurostat, the statistical office of the European Commission, inflation in the euro zone reached a record figure of 9.1% in August, two tenths more than in July.

The data, which confirms the first estimate published two weeks ago, reinforces the idea that the European Central Bank (ECB) could be even more aggressive in raising interest rates in its next meetings, despite the fact that this movement may hinder economic recovery.

The market has been anticipating this scenario for a long time. And this is reflected in the evolution of the 12-month Euribor, with an unstoppable rise for weeks that left its daily price at 2.263% on Friday. Just a week ago it was at 1.903%. And at the beginning of the year it was still trading negative, at -0.5%. Conclusion? The Euribor returns to 2009 levels and is facing the highest rate of increase in mortgage prices in recent decades.

With eleven business sessions, the monthly average for September remains at 2.016%. And everything indicates that the month will end above 2%, levels that have not been seen in a monthly average since December 2011 and that far exceed the 1.249% of last August.

The blow to mortgage holders who have to review their loan on an annual basis will be brutal. And in this scenario, the unions have begun to press for the creation of an aid fund for those who once contracted a variable loan. According to the proposal presented this Friday, the beneficiaries would be people with a total income below the average salary in Spain and people or living units in a situation of social vulnerability.

In order to access this fund, those people who meet one of the stated requirements must prove, in turn, that the monthly payment of the mortgage on their habitual residence exceeds 30% of the net monthly income.

The idea is that the state fund covers, through a monthly benefit, the extra cost generated in the event that the Euribor exceeds a value of 1.5 points and would have a maximum duration of 12 months, with the possibility of extension in the event that the established requirements persist.

UGT estimates that the measure may affect about 340,000 home mortgages, which would require 650 million euros to absorb the entire extra cost generated in families. In this sense, he recalls that the Government expects to collect 1,500 million euros with the new banking tax, an amount that "will be even higher by about 250 million after the announcement of the ECB rate hike", so the dimension of the proposed fund would be about a third of that collection.

Price increase

The big question now is whether the ECB will succeed in its objective. The rise in prices in the euro zone intensified in August despite the fact that the year-on-year rise in energy prices slowed to 38.6%, one point less than in July. But this data was compensated upwards by the increase in the price of processed foods, alcohol and tobacco, which in August was 10.5%, when in July it had been 9.4%.

When excluding the impact of energy from the calculation, the year-on-year inflation rate in the euro zone stood at 5.8% in August, compared to 5.4% in the previous month, while also excluding the effect of prices of fresh food, alcohol and tobacco, core inflation reached a record 4.3%, three tenths more than in July.

This data, that of the underlying, is the one that most worries the ECB, which is also several steps behind the Federal Reserve (Fed) in the pace of tightening monetary policy. At its last meeting, the agency surprised with a record rise of 75 basis points in interest rates. And after the latest known data, many voices already point to an equal movement in October.

Above all because, in addition to inflation, the ECB has set itself the goal of protecting the euro. The single currency has lost a good part of its value against the dollar, which this year has gained muscle by taking advantage of the higher rate of rises in interest rates in the US. The loss of parity in the daily exchange of both currencies has become in something habitual in the last weeks.

Who wins and who loses from the weakness of the single currency

The problem is that the Fed will continue to press the accelerator. And there are already analysis houses that suggest that the September rate hike will not be 75 basis points, but 100. A historic move that would undoubtedly add more pressure to the ECB.

According to data collected by Eurostat, the largest price increases occurred in Estonia (+25.2%), Latvia (+21.4%) and Lithuania (+21.1%), while the smallest increases were recorded in France (+6.6%), Malta (+7%) and Finland (+7.9%).

Of the 27 countries that make up the European Union, double-digit inflation was recorded in 15 of them in August.

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