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☆ Europe's problems are far bigger than a shallow recession
▼ + stars: | 2023-11-14 | by ( Balazs Koranyi | ) www.reuters.com time to read: +5 min

Deep structural problems mean Europe is bound to trail most other big economic areas for years to come. The labour market remains tight and the world economy is rebounding, so external demand is also likely to be healthier. Fearing it will be difficult to hire in future, firms are now hanging onto workers, creating even more labour market tightness, potentially fuelling wage growth and weakening productivity. The potential growth rate for Europe's largest economy is now below 1%. European Union governments are meanwhile struggling to reach consensus on bigger questions that will help shape the future.

Persons: Philip Lane, Erik Nielsen, Eric Gaillard, Europe's, There's, Lane, Reinhard Cluse, Mark John, Catherine Evans Organizations: Central Bank's, REUTERS, European Commission, UBS, European Union, Thomson Locations: FRANKFURT, Europe, Nice, France, United States, Germany

☆ Global markets brace for fallout as Middle East tensions rise
▼ + stars: | 2023-10-15 | by ( Matt Tracy | ) www.reuters.com time to read: +3 min

Oil prices leapt nearly 6% on Friday, as investors priced in the possibility of a wider Middle East conflict. The first indicator of reaction to weekend developments will likely come when oil starts trading in Asia later on Sunday. Reuters Graphics"I have no clue whether markets will remain relatively well behaved," said Erik Nielsen, group chief economics advisor at UniCredit. The war between the Islamist group Hamas and Israel poses one of the most significant geopolitical risks to oil markets since Russia's invasion of Ukraine last year. Rising oil prices are unlikely to have a significant impact on U.S. gas prices or consumer spending, analysts noted.

Persons: Violeta Santos Moura, Ben Cahill, Erik Nielsen, Bernard Baumohl, Baumohl, it's, Nomura, George Moran, Matt Tracy, Dhara, Megan Davies, Muralikumar, Emelia Organizations: REUTERS, Rights, Hamas, Energy Security, Center for Strategic, International Studies, Reuters, U.S, Economic Outlook Group, European Central Bank, Chevron, Thomson Locations: Gaza, Kibbutz Beeri, Israel, Palestinian, Asia, UniCredit, Princeton , New Jersey, United States, Europe, Ukraine, Egypt, Washington, London

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 26, 2023. A near-miss on a debt ceiling showdown in the Spring led to the loss of another Triple-A sovereign credit rating. A fiscal adjustment akin to the one enacted in 1993 would be enough to do that again over 5 years. "However, this looks unlikely anytime soon given congressional gridlock, a lack of political attention to deficit reduction and the upcoming 2024 election," it concluded. On current poll readings at least, next year's election will do nothing to end the fiscal war.

Persons: Brendan McDermid, it's, Donald Trump, Democrat Joe Biden, Erik Nielsen, what's, Stephen Jen, Jen, Trump, Biden, Goldman Sachs, Goldman, William Maclean Organizations: New York Stock Exchange, REUTERS, U.S, Presidential, AAA, Democrat, Biden, Trump, Congress, Ukraine, Treasury, Republican, Reuters, GRIDLOCK, Thomson Locations: New York City, U.S, loggerheads, Russia, Ukraine, United States

☆ Europe's financial system will begin to fray as ECB continues tightening, says economist
▼ + stars: | 2023-06-30 | by ( ) www.cnbc.com time to read: 1 min

Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailEurope's financial system will begin to fray as ECB continues tightening, says economistThe ECB will hold rates high to avoid admitting they have overtightened, according to Unicredit Chief European Economist Erik Nielsen

Persons: Erik Nielsen

☆ Rate cuts, hikes and pauses: The world's central banks just made very different decisions
▼ + stars: | 2023-06-19 | by ( Silvia Amaro | ) www.cnbc.com time to read: +2 min

From hawkish pauses to rate hikes and dovish tones, the world's biggest central banks last week struck very different tones on monetary policy. The European Central Bank on Thursday hiked rates and surprised markets with a worsening inflation outlook, which led investors to price in even more rate increases in the euro zone. This followed a Federal Reserve meeting where the central bank decided to pause rate hikes. Just days before that, China's central bank lowered its key medium-term lending rates to stimulate the economy. In Japan, where inflation is above target, the central bank has left its ultra-loose policy unchanged.

Persons: Carsten Brzeski, —, Erik Nielsen, UniCredit Organizations: European Central Bank, Reserve, ING Germany, CNBC, ECB, Bank of England Locations: Japan, Europe, Asia

☆ BoE's Bailey says rate-setters can put inflation before bank worries
▼ + stars: | 2023-03-27 | by ( William Schomberg | ) www.reuters.com time to read: +2 min

LONDON, March 27 (Reuters) - Bank of England Governor Andrew Bailey signalled on Monday that interest rate-setters would focus on fighting inflation and would not be swayed unduly by worries about the health of the global banking system. Some investors have argued that central banks should take into account the banking turmoil when setting interest rates. "With the Financial Policy Committee on the case of securing financial stability, the Monetary Policy Committee can focus on its own important job of returning inflation to target," Bailey said. As well as the BoE, the European Central Bank, U.S. Federal Reserve and Swiss National Bank have all raised interest rates this month, despite the high-profile bank failures including Silicon Valley Bank and Credit Suisse. Bailey repeated the BoE's view that further monetary tightening would be required if signs of persistent inflationary pressure became evident.

[1/3] The logo of Swiss bank Credit Suisse is seen in front of a branch office in Bern, Switzerland November 29, 2022. REUTERS/Arnd Wiegmann/File PhotoWASHINGTON/FRANKFURT, March 26 (Reuters) - Stress in the banking sector is being closely monitored for its potential to trigger a credit crunch, a U.S. Federal Reserve policymaker said on Sunday, as a European Central Bank official also flagged a possible tightening in lending. "What's unclear for us is how much of these banking stresses are leading to a widespread credit crunch. Meanwhile in Europe, the ECB believes that recent banking sector turmoil may result in lower growth and inflation rates, its vice president Luis de Guindos said. Turbulence among banking stocks on both sides of the Atlantic continued into the end of the week, despite efforts by politicians, central banks and regulators to dispel concerns.

☆ As banking sector confidence falters, central banks called on to do more
▼ + stars: | 2023-03-26 | by ( Davide Barbuscia | ) www.reuters.com time to read: +4 min

NEW YORK, March 26 (Reuters) - Some investors and analysts are calling for more coordinated interventions from central banks to restore financial stability, as they fear that tumult in the global banking sector will continue amid rising interest rates. On Friday, shares of Deutsche Bank (DBKGn.DE) plunged amid concerns that regulators and central banks have yet to contain the worst shock to the banking sector since the 2008 global financial crisis. Global central banks including the Federal Reserve have recently taken measures to enhance the provision of liquidity through the standing U.S. dollar swap line arrangements. "The issue with European banks and big U.S. banks at the moment is confidence. Meanwhile, overall deposits in the banking sector have declined by almost $600 billion since the Fed began to raise interest rates last year, the biggest banking sector deposit outflow on record, noted Torsten Slok, chief economist at Apollo Global Management.

☆ Analysis: ECB faces new communication challenge as inflation falls
▼ + stars: | 2023-02-16 | by ( Balazs Koranyi | ) www.reuters.com time to read: +5 min

But core inflation is proving stubborn and could still rise from last month's 5.2%. "We have to continue to emphasize that we have this medium term perspective," Klaas Knot, the Dutch central bank chief said. It has oscillated between focusing on current inflation, future inflation and core inflation. Wages are the biggest factor in that sector's prices and services inflation is still just above 4%. So wage growth of the magnitude of 5% or more could push services inflation even higher.

☆ Analysis: Investors on alert for policy error after cheering slower rate hikes
▼ + stars: | 2022-12-12 | by ( Yoruk Bahceli | ) www.reuters.com time to read: +6 min

With inflation potentially peaking and recession looming, the risk of overtightening accelerating a downturn is on investors' watchlists for next year. "We're past the point of the big (Fed) policy mistake, we think they kind of made it," Robert Waldner, head of macro research at $1.3 trillion asset manager Invesco, said. Recent Fed research suggests the bank has exceeded the level called for by commonly followed policy rules and should target 3.52%, versus the 3.75%-4% it currently targets. Fed research, taking into account the premium on mortgages and corporate borrowing costs, has found financial conditions in September already reflected the equivalent of a 5.25% policy rate. I am worried the Fed may not be taking into account the lags in their monetary policy," Costerg said.

The stakes are high as it potentially affects the future use and effectiveness of extraordinary monetary policies such as bond-buying 'quantitative easing' (QE) and questions the wider political independence of central bank policymaking. The European Central Bank, Bank of England and U.S. Federal Reserve are all - to differing degrees - now facing a backwash from years of policy-driven but lucrative balance sheet expansion. As they lift interest rates, that balance sheet burns a hole in their pockets - or more particularly the pockets of their governments long used to windfalls coming the other way. That will surely climb as the BoE is expected to at least double its policy rate, the rate paid on bank reserves, by May. G4 central bank balance sheetsThe easy-money era is overReuters Graphics Reuters GraphicsThe opinions expressed here are those of the author, a columnist for Reuters.

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