ECB

European bond traders are chasing the wrong lead

11 Apr 2024

The European Central Bank flagged a rate cut in June, before the Federal Reserve. Yet yields on Germany’s two-year bonds are near the five-month high hit after Wednesday’s strong US inflation data. If the ECB is true to its word, obsessing about the United States won’t work.

ECB’s rate cuts can help bond traders – and itself

8 Apr 2024

Holders of euro zone government debt have lost 14% in three years. Frankfurt policymakers can change that by cutting rates in June, before major peers. Lower borrowing costs would have another winner: the European Central Bank, which could save $7 bln a year in interest expenses.

ECB’s money drain has silver lining for markets

14 Mar 2024

The European Central Bank is ready to exit its huge stimulus programme. With 4.7 trln euros of bonds on its books, that will take time but policymakers want few surprises. A new regime of setting rates and relying on banks to ask for loans will wean them off cheap money.

Slow growth puts ECB before Fed in rate-cut line

7 Mar 2024

The European Central Bank held borrowing costs but President Christine Lagarde suggested it might lower them in June. That could make her the first major central banker to ease policy, ahead of US Federal Reserve boss Jay Powell. Sadly, that’s only due to dire euro zone growth.

Why central banks risk making more mistakes

27 Feb 2024

Western rate-setters were late in fighting inflation. In this Exchange podcast, TS Lombard economists Dario Perkins and Davide Oneglia argue that, as price growth abates, the US Federal Reserve and European Central Bank may be too slow in easing monetary policy.

ECB is battling an imaginary wage spiral

24 Jan 2024

European Central Bank President Christine Lagarde is set to hold rates this week because she fears rising salaries will boost inflation. Yet euro zone workers are getting raises of just 3.8%, down from a year ago. Frankfurt may not want to cheer bigger pay, but it can ignore it.

BoE can win inflation race but lag on rate cuts

17 Jan 2024

UK price growth could drop in the spring due to lower energy bills, enabling the Bank of England to hit its 2% target before the US and Europe. But wage and services inflation will stop Governor Andrew Bailey from reducing borrowing costs. So will a likely UK fiscal splurge.

Bond deluge will nudge ECB to softer rate stance

4 Jan 2024

European countries’ fiscal needs and the end of central bank buying mean a record 675 bln euros of sovereign debt will be on sale in 2024. That may keep borrowing costs high for states like Italy. ECB President Christine Lagarde can help by meeting investor hopes for swift cuts.

Policymakers take divergent paths toward rate exit

14 Dec 2023

Central banks in Europe and the US left borrowing costs untouched this week. But the latter went a step further and unexpectedly promised cuts. In this Viewsroom podcast, Breakingviews columnists explain how ratesetters, who were slow to tackle inflation, could be laggards again.

Powell was pragmatic; Lagarde will have to be

14 Dec 2023

The European Central Bank, like the US Federal Reserve, left its rates unchanged. But unlike Fed Chair Jay Powell, ECB boss Christine Lagarde didn’t imply that lower inflation meant looser monetary policy. A slowing economy and abating price pressures will push her there in 2024.

BoE is a more credible rate-cut sceptic than ECB

12 Dec 2023

Policymakers in London and Frankfurt are unlikely to touch borrowing costs this week. Their challenge is to persuade markets they are not about to start slashing them. Bank of England Governor Andrew Bailey has the easier task, but only because the UK is in worse economic shape.

Japan’s rates tweak is careful and crafty

2 Nov 2023

The central bank changed its policy to allow higher 10-year bond yields. Unlike the US, it can afford to raise borrowing costs slowly as inflation is low. In this Viewsroom podcast, Breakingviews columnists explain why monetary tightening as others loosen may give Tokyo an edge.

ECB’s rosy outlook is a recipe for economic pain

26 Oct 2023

Frankfurt policymakers think the euro zone will grow by 0.7% in 2023 and want to keep rates high to fight inflation. Yet most data point to stagnation or recession. A gloomier perspective would enable the European Central Bank to ease policy and help the bloc’s economy.

Europe’s rising bond vigilantes are necessary evil

11 Oct 2023

Debt costs for weaker states like Italy are jumping. Europe’s delay in agreeing new fiscal rules means hostile markets are the only credible check on government spending. Slowing growth and a hamstrung ECB means the backdrop may well get choppier.

Lagarde can stop fretting about rising salaries

11 Sep 2023

The European Central Bank chief worries that consumer prices will stay high because wages are growing at the fastest rate in 30 years. Yet raises are below inflation and slowing. In the past, the ECB cut rates even with strong labour markets. It may have to do so again soon.

Lagarde hides velvet policy in iron talk

27 Jul 2023

After lifting borrowing costs to a record high, the ECB president sounded tough on inflation to persuade markets interest rates will stay elevated. But she also hinted the central bank could pause. Investors can prepare for a less aggressive monetary stance.

Inflation dip puts central bankers in a pickle

27 Jul 2023

The Federal Reserve and ECB once again hiked interest rates. Yet US price rises are easing with few signs of economic pain. In this Viewsroom podcast, Breakingviews columnists discuss how this phenomenon, dubbed ‘immaculate disinflation’, complicates what policymakers do next.

ECB’s tough-guy act is getting harder to maintain

26 Jul 2023

Traders expect the European Central Bank to hike rates by 25 basis points on Thursday. President Christine Lagarde wants them to stay high to curb inflation, yet markets are betting on cuts in early 2024. Unless she wins the argument, borrowing costs may have to rise more.

Why central banks cannot relax in inflation fight

4 Jul 2023

Western policymakers have frantically hiked interest rates to dampen consumer prices. In this Exchange podcast, Claudio Borio, a top official at the Bank for International Settlements, argues that rate-setters need to keep going to ensure costs of living won’t stay elevated.

Capital Calls: Digital euro, Thames Water

28 Jun 2023

Concise views on global finance: Brussels is in a new push to convince EU member states and the European Parliament to endorse a digital euro; Britain’s Thames Water could be placed into special administration.