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The new German central bank (Bundesbank) vice-president Claudia Buch poses during a photocall at the Bundesbank headquarters in Frankfurt, May 20, 2014. Buch, who has been the vice-president of Germany's central bank for 10 years after a career in academia, was chosen last week over Spain's Margarita Delgado, the European Parliament's preferred candidate. The EU Parliament will have a final say on the appointment on Wednesday at a vote scheduled for 1400 GMT. At the hearing, Buch said she would immediately resign from her role as an alternate if appointed as chief supervisor. ECB President Christine Lagarde said last week that the 26-member Governing Council followed the rules in Buch's selection.

Persons: Claudia Buch, Ralph Orlowski, Buch, Spain's Margarita Delgado, Joachim Nagel, Christine Lagarde, Marco Zanni, Frank Siebelt, Hugh Lawson, Alexandra Hudson Organizations: REUTERS, Central, Single, EU, ECB, Reuters, Council, Democracy Group, Alexandra Hudson Our, Thomson Locations: Frankfurt, FRANKFURT, Spain

A view shows the placards of the political parties in front of the European Central Bank (ECB) building in Frankfurt, Germany, September 14, 2023. The central bank for the 20 countries that use the euro has already raised interest rates 10 times to record levels but inflation remains well above its 2% target. ECB President Christine Lagarde said last week that policymakers had not discussed the bond-buying schemes at their latest policy meeting. She described the PEPP as the ECB's "first line of defence" to preserve policy transmission - central bank jargon for bond market stability in the most indebted countries. Slovenian central bank governor Bostjan Vasle recently backed selling bonds bought under the ECB's older Asset Purchase Programme, which is less flexible than the PEPP.

Persons: Wolfgang Rattay, Christine Lagarde, Bostjan Vasle, Peter Kazimir, Catherine Evans Organizations: European Central Bank, REUTERS, Central Bank, Reuters, ECB, Thomson Locations: Frankfurt, Germany, Italy, FRANKFURT, Athens, Slovenian, PEPP, Sintra

"The inflation momentum is simply too strong for the ECB to pause," Danske Bank economist Piet Haines Christiansen said. In contrast, markets have fully priced in unchanged rates at next week's meeting of the U.S. Federal Reserve, which started raising rates earlier and has moved higher than the ECB. "We doubt that this will be possible and expect that a decision to hold rates steady today would mark the end of the tightening cycle." The euro zone's biggest economy, Germany, is bearing the brunt of an industrial slump and heading for recession, according to several forecasts. ECB President Christine Lagarde will hold a news conference at 1245 GMT.

Persons: Piet Haines Christiansen, Dirk Schumacher, Christine Lagarde, Catherine Evans Organizations: ECB, European Central Bank, Reuters, Danske Bank, U.S . Federal Reserve, Services, Thomson Locations: FRANKFURT, Germany

The central bank for the 20 countries that share the euro faces a dilemma. "The inflation momentum is simply too strong for the ECB to pause," Danske Bank economist Piet Haines Christiansen said. Just 14 months ago, that rate was languishing at a record low of minus 0.5%, meaning banks had to pay to park their cash securely at the central bank. The euro zone's biggest economy, Germany, is bearing the brunt of an industrial slump and heading for recession, according to several forecasts. On Thursday, the ECB is also expected to cuts its growth projections for this year and next, leading some economists to argue it should hold off from raising rates this month.

Persons: Piet Haines Christiansen, Dirk Schumacher, Catherine Evans Organizations: ECB, European Central Bank, Reuters, Danske Bank, Services, Thomson Locations: FRANKFURT, Germany

At present, minimum reserves are remunerated at the ECB's deposit rate, now 3.5% after a string of interest rate hikes to tame inflation. The sources said some staff advocate leaving an adjustment of the corridor until the ECB ends its current tightening cycle, with the final move a change in the deposit rate. The ECB has given itself a year-end deadline to decide, the sources said, although details could take longer to work out. Now, the deposit rate effectively sets an interest rate floor, similar to the way U.S. Federal Reserve rates function and the sources indicated this was likely to remain the case. Such a "demand driven floor-system" would let the ECB add excess liquidity as needed as opposed to running a permanently oversized balance sheet.

Persons: Isabel Schnabel, Catherine Evans Organizations: Staff, Senior European Central Bank, Reuters, Market, ECB, Federal, Bank of England, Thomson Locations: Helsinki, SINTRA, Portugal, Sintra, Finland

Growth in the euro zone is at best stagnating and inflation has been moderating for months, courtesy of lower energy prices and the steepest increase in interest rates in the ECB's 25-year history. But inflation in the euro zone is still unacceptably high for the ECB at 6.1% and underlying price growth, which typically excludes food and energy, is only starting to slow. That was set to keep the ECB on the tightening path, particularly after it failed to predict the current bout of high inflation and began raising rates later than many global peers last year. Two quarters of contraction in industrial powerhouse Germany dragged the euro zone into a shallow recession last winter and the economy is likely to eke out only modest growth this year. "The Governing Council’s past rate increases are being transmitted forcefully to financing conditions and are gradually having an impact across the economy," the ECB said in the statement.

Persons: Christine Lagarde, Francesco Canepa, Catherine Evans Organizations: European Central Bank, ECB, U.S . Federal Reserve, Staff, Reuters, Germany, Thomson Locations: FRANKFURT, ECB's

That is likely to keep the ECB on the tightening path, particularly after it failed to predict the current bout of high inflation and began raising rates later than many global peers last year. Economists polled by Reuters expect another move of the same magnitude in July before the ECB pauses for the rest of 2023. Instead, euro zone rate-setters have focused on actual economic data that has been painting a mixed picture. Two quarters of contraction in industrial powerhouse Germany dragged the euro zone into a shallow recession last winter and the economy is likely to eke out only modest growth this year. As a result, economists expect the ECB to send out a more balanced message about the outlook than at recent meetings, when it stressed the need to raise rates further to cool demand.

Persons: Carsten Brzeski, Christine Lagarde, Berenberg, Francesco Canepa, Catherine Evans Organizations: ECB, European Central Bank, U.S . Federal Reserve, ING, Reuters, Deutsche Bank, Germany, Thomson Locations: FRANKFURT, ECB's

And an ECB survey of lending data for March revealed banks were tightening access to credit even as demand for it from borrowers collapsed, resulting in the slowest pace of growth in credit to households since 2018. And it was mirrored by March lending data, which showed growth in corporate credit slow to 5.2% year on year. "With the next big TLTRO expiring towards the end of June amid further key rate hikes, credit demand will be further dampened," Martin Wolburg, senior economist at Generali Investments, said. There was a smaller decrease in demand for consumer credit and other lending to households. Lending data also showed the annual increase in lending to households slowing to 2.9% from 3.2%.

Summary German public sector secures 5.5% rise for 2024Deal sets precedent, piles pressure on ECB's forecastsECB to raise rates on May 4FRANKFURT, April 24 (Reuters) - The "very generous" pay rise secured by Germany's public sector workers may complicate the European Central Bank's fight against inflation, analysts said on Monday. "The permanent increase next year may raise some eyebrows at the ECB because wages were supposed to peak this year," Natixis economist Dirk Schumacher said. Other economists noted the German public sector pay agreement followed a period of falling real wages, when prices grow faster than salaries. "Doves may argue that the deal comes after a period of wage restraint and is reasonably front-loaded," Christian Schulz, an economist at Citi, said. "This means that it will probably take at least another five years for public sector wages to recover this loss of purchasing power and for employees to have the standard of living they had in 2021," Fratzscher said.

"I am very well aware of the delicacy of the situation ... but we are not yet at the finish line." Fellow hawk Simkus also told reporters in Vilnius he believed that Thursday's "was not the last rate hike". But neither policymaker made a case for a rate increase as soon as the next ECB meeting, and Kazimir said it was useless to speculate about the May 4 decision. French central bank governor Francois Villeroy de Galhau said the hike reflected the ECB's inflation-fighting priorities and signalled confidence in the solidity of European banks. "There are risks to inflation on both sides, but in my view, upward risks are much greater," he said.

Investors had begun to doubt the ECB's commitment to another big rate hike this week after the collapse of Silicon Valley Bank (SVB) in the U.S. sent ripples through global financial markets. The source added that formal proposals for the meeting had not yet been distributed but policymakers had seen the new quarterly projections. They were likely to push back against committing to further rate increases and say instead that any new move would depend on incoming data. The ECB can push through decisions with a simple majority though President Lagarde has been known to seek the broadest possible consensus. Investors have sharply cut their bets on further rate rises since the SVB collapse, with the deposit rate now seen peaking at 3.65% in the autumn, compared with an outlook last week of more than 4%.

FRANKFURT, March 1 (Reuters) - The European Central Bank's top three shareholders charted different paths for interest rates on Wednesday, in a preview of the difficult debate awaiting the ECB in the coming weeks. Bundesbank President Joachim Nagel appeared to back those expectations, anticipating "further significant interest rate steps" after March, when the ECB has already pencilled an increase worth half a percentage point. "The interest rate step announced for March will not be the last," Nagel, a policy hawk who favours higher rates, said in a speech. "Further significant interest rate steps might even be necessary afterwards, too." Based on national data out already, Barclays predicted that underlying inflation could accelerate to 5.4% from 5.3%.

This would take the rate the ECB pays on bank deposits to the highest level since November 2008, after a steady climb from a record low of -0.5% in July. Reuters GraphicsThe ECB said in December that rates would be increased "at a steady pace" until it is happy inflation is heading back down to its 2% target. BNP Paribas also thought the ECB might take out the reference to a "steady pace" of rate hikes or offset it so that a 50-basis-point increase would be "not predetermined (but) still a possible outcome". And an ECB survey showed banks were tightening access to credit by the most since the 2011 debt crisis - usually the harbinger of lower growth and slowing inflation. To some observers, this meant the ECB would be wise not to commit to any future policy move.

"That would be a problem for any central bank." TUG OF WARLagarde's commitment also puzzled ECB-watchers because the central bank had previously said it wouldn't make such public predictions - known as forward guidance - anymore, but instead take each decision based on incoming data. This of course leads to a tug of war between the ECB and the markets on the narrative," he added. ING's Brzeski said the ECB lacked a clear thought-leader on its Governing Council who could steer markets like Lagarde's predecessor, Mario Draghi. "The cacophony of diverging voices and the lack of clarity on who is the leading voice keeps hurting the ECB," Brzeski said.

After being wrong-footed by sudden price rises, the ECB has been raising rates at an unprecedented pace. Inflation has soared since economies reopened after the COVID-19 pandemic, driven by supply bottlenecks and then surging energy costs following Russia's invasion of Ukraine. Justifying Lagarde's pledge for more hikes, the ECB's new projections on Thursday showed inflation above the ECB's 2% target through 2025. [1/2] Signage is seen outside the European Central Bank (ECB) building, in Frankfurt, Germany, July 21, 2022. The ECB also said it currently expected any recession to be "relatively short-lived and shallow" and Lagarde noted that euro unemployment levels were at "rock-bottom".

[1/2] Signage is seen outside the European Central Bank (ECB) building, in Frankfurt, Germany, July 21, 2022. After being wrong-footed by sudden price rises, the ECB has been raising rates at an unprecedented pace. Inflation has soared since economies reopened after the COVID-19 pandemic, driven by supply bottlenecks and then surging energy costs following Russia's invasion of Ukraine. "We judge that interest rates will still have to rise significantly and at a steady pace," Lagarde told a news conference following its rate announcement. Money markets immediately moved to price in a peak deposit rate of just over 3% by July, compared to 2.75% before the meeting.

The new projections will put inflation comfortably above 2% in 2024 and just above it in 2025, said the source, who spoke on condition of anonymity because the forecasts are not yet public. Some ECB policymakers, particularly among "hawks" who favour higher rates, have recently voiced scepticism about its forecasts and called for a greater focus on current readings. Economists polled by Reuters foresaw inflation at 6.0% in 2023, 2.3% in 2024 and 1.9% in 2025. The ECB is due to sketch out its QT plan on Thursday. ($1 = 0.9408 euros)Reporting By Francesco Canepa; Editing by Catherine EvansOur Standards: The Thomson Reuters Trust Principles.

[1/2] Signage is seen outside the European Central Bank (ECB) building, in Frankfurt, Germany, July 21, 2022. Economists polled by Reuters expected the ECB to raise the rate it pays on bank deposits to 2% on Thursday before pushing it to 2.5% by March and 2.75% by June. The ECB was also due to lay out plans to stop replacing maturing bonds in its 5 trillion-euro portfolio, reversing years of debt purchases that have turned the central bank into the biggest creditor of many euro zone governments. The ECB will announce its policy decisions at 1315 GMT, followed by a news conference of President Christine Lagarde at 1345 GMT. "The counterpart of slower rate hikes will be hawkish guidance on the terminal rate ... accompanied by earlier or faster 'passive' QT."

Market betting has been swinging between a 50- and a 75- basis-point increase when policymakers meet on Dec. 15. "It's extremely exciting but predicting the ECB for a market participant has become impossible," Carsten Brzeski, global head of macro at ING, said. That saves it from more painful changes of tack after ECB President Christine Lagarde went from all but ruling-out rate hikes this year to presiding over the steepest tightening cycle in the euro's history. But Lane said in a blog post on Friday it may "overstate" how persistent inflation may be. "Inflation is being driven by factors they can't control," he added, citing energy prices, geopolitical tensions and supply-chain disruptions as some of them.

Strengthening the case for another 75 basis point increase, German inflation jumped to 10.9% this month, far beyond expectations for a reading of 10%. "There is no easing in sight, and next year the inflation rate is only likely to fall because energy prices are unlikely to rise again as strongly as this year, partly due to government intervention," Commerzbank economist Ralph Solveen said of the German inflation figures. While few governors ventured to estimate where interest rate hikes could end, de Cos said that models suggest a significantly lower terminal rate than markets now expect. "On the basis of current information, the median terminal rate value across models is at 2.25%-2.50%," de Cos said. Rate hike talk is intensifying even as recession fears rise.

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