ECB

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.

Bank of Italy pick will give Italy an EU headache

28 Jun 2023

ECB member Fabio Panetta is heading home to lead the national central bank. That will remove a dove from Europe’s rate-setters, just as they pursue a hard line on inflation. To send another Italian to Frankfurt, premier Giorgia Meloni may need to compromise on Brussels issues.

ECB’s autopilot raises risk of hard landing

14 Jun 2023

The European Central Bank is set to hike rates on Thursday and again in July. But traders’ hopes for cuts soon afterwards may be dashed, given pressure from hardline countries to tame stubborn inflation. Europe’s recovery is looking increasingly fragile.

Stingy European savers will help the ECB, not LVMH

6 Jun 2023

Euro zone citizens have 1 trln euros in pandemic-era savings. Unlike their US peers, they are unlikely to splash the cash in malls and restaurants. That’s bad news for retailers and service providers, but it will help Frankfurt’s rate-setters slow the economy and cool inflation.

ECB’s crisis tool works best if it’s never used

30 May 2023

The European Central Bank is touting its powers to buy sovereign bonds if they come under attack from the market. That has kept traders in check, so far. The trick for Frankfurt officials is to convincingly threaten to deploy emergency measures without ever having to.

Lagarde fine-tuning will aid sputtering euro zone

4 May 2023

The European Central Bank’s move to raise rates by just 25 basis points and speed up its exit from bond-buying signals a less aggressive approach. High inflation calls for more hikes, but Frankfurt’s decision to use a scalpel rather than a hammer will benefit Europe’s economy.

ECB risks interest-rate blunder after messy data

2 May 2023

The European Central Bank is none the wiser following a raft of new numbers. Lenders may be reining in credit, but headline inflation is rising. Hardliners will still push for a 50 basis point hike on Thursday. The uncertain conditions call for an increase half that size.

Dollar bulls are praying for a mild downturn

26 Apr 2023

The greenback has lost 14% versus the euro since September, as investors bet on Europe’s recovery and China’s reopening. Inflation and interest rate trends still favour the single currency. The best hope for the buck is a minor economic slowdown to boost its safe haven status.

Central bank pilots risk leaving cockpit too soon

14 Apr 2023

Western policymakers at the IMF Spring Meetings hinted that their mission to slay inflation without a recession is nearly accomplished. Investors agree, and hope for rate cuts. That’s overdone. A soft landing is in sight, but so too is the danger of complacency.

European pay anger is more costly than inflation

3 Apr 2023

Workers are striking and demanding salary hikes to make up for higher living costs. Governments and central banks are warning about the risks of a consumer price spiral, but after three years of real wage stagnation, further restraint will inflict political and economic pain.

ECB’s inflation battle has a 550 bln euro problem

31 Mar 2023

Christine Lagarde must keep tightening policy without triggering a bank crisis. She faces a test in June when a chunk of emergency loans comes due, increasing lenders’ funding costs. Targeted help, however, could ease financial risks and preserve the fight against high prices.

Bank woes expose gaps in EU safety net

22 Mar 2023

As the US and Switzerland scramble to head off contagion, the European Union is watching from a shaky perch. While the euro zone probably could fend off a new banking crisis, it lacks some tools for doing so. Even a backstop for insuring retail deposits remains out of reach.

Lagarde is not for turning; the ECB might have to

16 Mar 2023

The head of the European Central Bank ignored a transatlantic financial rout and hiked rates by 50 basis points. For her, inflation, not banks’ health, is the real problem. She may soon have to worry about the damage her aggressive policy is inflicting on the euro zone economy.

Banking turmoil could help euro doves cry victory

14 Mar 2023

With inflation running hot, the European Central Bank looked set to raise rates by 50 basis points on March 16. The collapse of two US banks flipped the script. As investors fear financial instability, the ECB might go easier and rely on previous hikes to curb consumer prices.

“No landing” talk leaves stocks in no man’s land

6 Mar 2023

Bond investors worry that strong economic data will keep borrowing costs high. That’s pushed yields on 10-year German debt to an 11-year high. Yet buoyant equity markets are pricing in a dream scenario of faster growth and falling interest rates. They are in for a rude awakening.

ECB’s inflation-fighting hose may have a blockage

20 Feb 2023

The central bank has hiked rates by 3 percentage points since July, pushing up corporate borrowing costs and squeezing demand for credit. Yet firms and households have longer-term debt than in the past. That means tighter monetary policy will take a while to cool the economy.

How central banks got the inflation crisis wrong

14 Feb 2023

Western policymakers have hiked interest rates by more than 10 percentage points since 2021. Yet prices remain high. In this Exchange podcast, Paul Donovan, chief economist at UBS Global Wealth Management, explains how rate-setters failed and what they should do next.

How investors can profit from Fed-ECB divergence

7 Feb 2023

As America flirts with a recession, the U.S. central bank is set to stop tightening as interest rates near 5%. That will leave ECB President Christine Lagarde as the West’s most hawkish policymaker. The transatlantic split is an opportunity for traders who bet on European assets.