ECB night

Debate opens at ECB on whether to end bond buybacks to accelerate balance sheet reduction

Banca March: The European Central Bank will consider ending bond buybacks to accelerate balance sheet reduction. As announced by Christine Lagarde at the European Parliament Hearing, it is expected to tighten monetary policy by reducing bond purchases next year. The €1.7 trillion Pandemic Emergency Purchase Programme (PEPP) provided for the reinvestment of asset gains until the end of 2024. However, the debate has opened up between the hawks, who defend…

BCE Largarde Atenas Octubre2023

ECB to keep tightening until inflation shows clear signs of moving closer to 2% target

Link Securities| According to the minutes of the October meeting of the European Central Bank (ECB) Governing Council, at which the institution kept interest rates unchanged after 15 months of consecutive increases, its members opted for a more cautious “wait and see” stance, influenced by the gradual easing of inflationary pressures and concerns about an imminent recession. This decision follows a series of ten consecutive rate hikes since July 2022,…

ECB buying corporate

ECB’s Bank Lending Survey clearly shows contraction in credit supply and demand

Peter Goves (MFS Investment Management)| We believe ECB policy rates have most likely peaked for this cycle. This argument is based on three pillars: growth dynamics, the inflation outlook and what the ECB itself is communicating. On growth, the euro area is currently operating in a quasi-recessionary environment. Although we don’t technically have two quarters of negative GDP prints, Q3 growth was -0.1% and below ECB expectations. The vast majority…

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ECB leaves policy rates unchanged after Thursday’s Governing Council meeting

Annalisa Piazza (MFS Investment Management)| The ECB left policy rates unchanged after yesterday’s Governing Council meeting, with the depo rate remaining at 4%. Forward guidance remained unchanged, with future decisions being completely data dependent. Based on the current assessment, the ECB will leave rates at sufficiently restrictive levels to make sure inflation returns to 2%. EGBs rallied after the relatively dovish press conference and spreads marginally tightened. At the current…

ECB night

ECB considers raising banks’ reserve requirement from 1% ($170bn) to 3-4% to reduce excess liquidity ($3.6bn).

As the risk of stagflation scenarios gains momentum, ideas to cut excess liquidity (close to €3.5trn) and the costly size of the ECB’s huge balance sheet are re-emerging. And the problem for credit markets, and especially peripheral ones, is that the ECB may already be looking for alternatives. According to Reuters, the ECB is discussing the option of accelerating the end of the Pandemic Emergency Purchase Programme (PEPP) from early…

BCE Sept 2023 4

ECB raises rates for tenth time in a row: 25 basis points to 4.50%, highest level in 20 years

CdM| The market had given a 70% probability that the ECB would raise +25 bps at yesterday’s meeting, and it happened. The Governing Council of the European Central Bank (ECB) decided to raise interest rates by 25 basis points, so that the reference rate for its refinancing operations will stand at 4.50%, while the deposit rate will reach 4% and the lending rate will be 4.75%. With this tenth consecutive…

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ECB announces decision to hike policy rates by 25bp

Peter Goves (MFS Investment) | Although the ECB didn’t quite explicitly say “we are at peak”, the change in guidance effectively points in that direction in our view. We likely have rates on hold ahead of us now as opposed to ongoing hikes in our view. In other words, unless there is a decisive change in prevailing data trends, we think the ECB is more or less done. The focus…

ECB night

ECB forgoes stabilising inflation before 2025 to avoid damaging economy

Minutes of the last monetary policy meeting. The ECB council considers that restoring price stability before that date would “depress economic activity to an unnecessary level”. Inflation has become a burden for the euro area and, in general, for all regions of the world. Central banks are fighting with all their might to try to regain the price stability dictated by their mandate, but some are already beginning to do…

ECB Bundesbank

ECB to inform Italy concerning dangers of bank windfall profits tax

Norbolsa| The ECB is preparing to send a letter to Italy with objections concerning the windfall profits tax, since, according to sources, the tax was announced without first informing the Bank of Italy or the ECB, as they are supposed to do according to EU rules. In this letter, the monetary authority will report on the dangers that this tax may have for the Italian economy.

euros prestamos

ECB’s tight monetary policy starts to bite with corporate credit at record lows

Link Securities| According to the European Central Bank’s (ECB) bank lending survey published on Tuesday, 2Q2023 saw a record fall in demand for corporate loans to its lowest level since the survey began in 2003. According to banks in the region, credit conditions tightened more than expected in the quarter under review. Banks also tightened conditions and terms further in 2Q2023 The survey also reported that the net tightening since…