J.P. Marín-Arrese | While markets mildly reacted to the widely discounted rate hike and the prospect of protracted high-interest levels, the stern message delivered by Jerome Powell unsettled them. Stocks tumbled as he emphasised the Fed’s commitment to tighten its policy as long as inflation remains unabated, flying high above its 2% medium-term target. In short, he sounded ready to do ‘whatever it takes’ to curb the current price spiral….
J.P. Marín-Arrese | Pressed by a skyrocketing headline and core inflation, the ECB took the boldest step in its history when it raised rates by 75 basis points. Further hikes will follow in a desperate attempt to curb the current price spiral. Will they achieve this goal? For all the bombastic claims made by Christine Lagarde, there is good reason to doubt the ECB might solve such an entrenched problem….
ifo President Clemens Fuest has welcomed the European Central Bank’s decision to raise interest rates. “Better late than never,” he said in Berlin on Thursday. “The 0.75 percent increase is a step in the right direction. Nevertheless, monetary policy remains very expansionary. Over the coming months, further interest rate increases will have to follow. Interest rates are still very low, and private households’ inflation expectations are constantly climbing higher. The…
J.P. Marín-Arrese |Christine Lagarde announced the first rate hike in a decade as an upfront offensive against inflationary pressures. While no one doubts this tightening aims at cutting short the current price race, the claim that it is an early reaction fails to match the records. For more than a year, all advanced economies have witnessed soaring prices. Yet, the ECB dismissed this trend as a temporary mismatch betwen demand…
Peter Goves, MFS Investment Management | A historic decision and the end of an era. No more negative policy rates from the ECB following the bold 50bp hike at the July meeting. Clearly, the ECB remains focused on its primary mandate: price stability. The shift in guidance is interesting and makes the ECB much data dependent as an institution. In turn, it likely means short rates will retain their sensitive…
The ECB confirms that it will remain present in the primary via re-investments. Also that the ESG strategy of the CSPP will arrive by the end of the year. In an explanatory note, the ECB confirms one of the doubts that continued to circulate among investors with the end of the CSPP’s net purchases (today): what its role would be after taking on a leading role in the primary market…
Link | The governor of the Central Bank of France and member of the ECB’s Governing Council, François Villeroy de Galhau, said in an interview yesterday that the tool being designed by the ECB to prevent fragmentation in the eurozone must send a message that there will be no limits. The more credibility it has, he said, the less it may have to be used. Villeroy defended the sale of…
Lidia Conde (Francfort) | explains Marcel Fratzscher, president of the DIW (Berlin Institute for Economic Research) who headed the ECB’s International Economic Policy Analysis Department in 2008-2013. In an interview to be published in this month’s issue of Consejeros magazine, Fratzscher explains that “The ECB is habdicapped because it cannot tacle the problem by raising rates, neither this year nor the next”, which is why “I am not in favour…
Fernando González Urbaneja | Uncertainty, volatility, acceleration… these are common concepts, clichés in any economic presentation that abound these days. We have seen it all in real time over the last few hours. Inflation rates soaring to almost double-digit levels over the last few months have put the (independent and competent) central banks and their monetary strategies on the spot. Inflation is a monetary issue, therefore the responsibility of the…
The ECB will abruptly reduce gross purchases of corporate debt from July, from a monthly average of €8 billion of gross purchases in the first five months of 2022 to just €1.8 billion for reinvestments. With the ECB’s announcement yesterday of the end of net APP purchases as of July, a six-year period of corporate QE comes to an end (since 2016 and with the exception of 2019) and has…