Make virtual opening remarks at XIII Encuentro Financiero on Tuesday, European Central Bank (ECB) Vice President Luis de Guindos noted that the central bank must continue to monitor underlying inflation. Speaking at a financial event in Milan last week, de Guindos said "for the headline (inflation) ... I think that we're there in terms of the peak, perhaps one decimal point up or down, it will be hovering, but I think that in the first half of next year we will see a decline.”
ECB says more to go on normalisation after 75 bps hike in October
LATEST ECB MEASURES TO BATTLE INFLATION
Euroarea flash inflation was 10.0% year-on-year in November, down from 10.6% YoY in October. Data strengthen Commerzbank’s expectation that the ECB will only raise key rates by 50 basis points at its December meeting.
While presenting the financial stability report on Monday, European Central Bank (ECB) policymaker and Slovak central bank President Peter Kazimir said that the “risk of recession in the Eurozone is growing.” “Rise in interest rates to continue despite unfavorable economic developments,” he added.
ECB latest analysis
ECB LATEST NEWS
OCTOBER MEETING REVIEW
The ECB has raised rates but has also subtly signaled the pace would slow. Saying a recession is more likely marks an acknowledgment of reality. Worries of a sharp fall in forward-looking surveys add to downside pressure on the euro. Ending forward guidance creates an uncertain environment that markets dislike. The ECB will not squeeze its balance sheet anytime soon.
The European Central Bank (ECB) announced on Thursday that it raised its key rates by 75 basis points (bps) following the October policy meeting as expected. With this decision, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 2%, 2.25% and 1.5% respectively.
SEPTEMBER MEETING REVIEW
Great effort – I can hear market participants saying while clapping their hands. The European Central Bank has done its best to sound hawkish, lower inflation also by keeping the euro afloat. The effort is there, but the outcome is in doubt.
The ECB announced on Thursday that it raised its key rates by 75 basis points (bps) following the September policy meeting as expected. With this decision, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 1.25%, 1.5% and 0.75% respectively.
July MEETING REVIEW
The European Central Bank (ECB) announced on Thursday that it raised its key rates by 50 basis points (bps) following the July policy meeting. Markets were expecting the bank to hike its rates by 25 bps. The bank also announced that the Governing Council approved the new anti-fragmentation tool titled "Transmission Protection Instrument (TPI)."
Forward guidance ist kaput. Has Germany secured a big rate hike by agreeing to shore up Italian bonds? That may or may not be the case, but the European Central Bank has undoubtedly delivered a massive package. That is positive for the euro.
June MEETING REVIEW
The European Central Bank's (ECB) governing council on Thursday decided to keep its benchmark deposit rate at -0.50%, as unanimously expected by market participants. The bank also said that it intends to raise interest rates by 25 bps at the July meeting, after having ended its Asset Purchase Programme (APP) on 1 July.
"It is tough making predictions, especially about the future" – these famous words by Yogi Berra may sound laughable, but are the gist of my bearish bias against the euro. The European Central Bank has signaled its intent to raise rates by 25 bps in July, but left the door open to a 50 bps move in September.
APRIL MEETING REVIEW
The European Central Bank left its benchmark deposit rate unchanged at -0.50% on Thursday as unanimously expected by analysts. The central bank also reiterated its guidance that net asset purchases (Quantitative Easing or QE) should end in Q3.
Price pressures have intensified – and that is where the European Central Bank's hawkishness ends. All the rest is dovish, and that is why the euro is under pressure in response to this decision. There may be more to come.
MARCH MEETING REVIEW
Inflation in the US, as measured by the headline Consumer Price Index (CPI), rose to 7.9% YoY in February, up from 7.5% in January, the US Bureau of Labor Statistics reported on Thursday. That was in line median economist forecasts for a reading of 7.9%.
Influenced by inflation, (almost) ignoring the war – the European Central Bank has announced a fast pace of tapering its bond-buying scheme as prices rise and despite the adverse effects of Russia's invasion of Ukraine.
February meeting review
The European Central Bank opted to leave its deposit rate unchanged at -0.5% on Thursday as unanimously expected. The bank maintained its guidance on interest rates, saying they would remain at present or lower levels until the conditions for a rate hike have been met. The bank also reaffirmed its QE policy guidance from December; that the PEPP will end in March, that in Q2 the APP will be lifted to EUR 40B per month, then tapered back to EUR 20B per month by Q4, while PEPP reinvestments will continue to the end of 2024.
November meeting review
Will 2022 be like 2019? That is what many people are hoping for, after nearly two years with covid. Hopes for next year also seem to guide the European Central Bank, which is why EUR/USD has room to lose its recent gains – related to weak US GDP. ECB President Christine Lagarde cited three critical factors that have pushed inflation higher.
September meeting review
The European Central Bank (ECB) decided to leave the interest rates on the main refinancing operations, the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and -0.50%, respectively, as expected.