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☆ Euro zone inflation ticks up in April
▼ + stars: | 2023-05-17 | by ( ) www.reuters.com time to read: +2 min

FRANKFURT, May 17 (Reuters) - Euro zone inflation accelerated last month, Eurostat said on Wednesday, confirming preliminary data pointing to increasingly stubborn price growth among the 20 nations sharing the euro. Overall price growth accelerated to 7.0% in April from 6.9% a month earlier, as rising services and energy costs offset a slowdown in food price growth. Excluding volatile food and fuel prices, core inflation slowed to 7.3% from 7.5%, while an even narrower measure, which excludes alcohol and tobacco, slowed to 5.6% from 5.7% in its first decline since last June. Services inflation, which is primarily driven by labour costs, accelerated to 5.2% from 5.1%, confirming policymaker fears that nominal wage growth could become dangerously fast. The ECB has long said that nominal wage growth of 3% would be consistent with its inflation target but this year's rise could be twice as fast.

☆ ECB's Schnabel sees more rate hikes until core inflation declines too
▼ + stars: | 2023-05-09 | by ( ) www.reuters.com time to read: +1 min

REUTERS/Kai PfaffenbachFRANKFURT, May 9 (Reuters) - The European Central Bank will keep raising borrowing costs until it sees core inflation decline sustainably, ECB board member Isabel Schnabel said on Tuesday, adding market expectations for rate cuts were misplaced. Schnabel backed the ECB's decision last week to slow down the pace of rate hikes but said these will continue until it sees a sustained fall in core prices, which typically exclude food and energy due to their wild swings. "We will raise rates decisively until it becomes clear that core inflation is also declining on a sustained basis." She added rates will probably stay high for long and the rate cuts expected by some market participants this year were "highly unlikely". While supply-side shocks from bottlenecks and energy prices continued to fade, the labour market was strong, wage growth was picking up and corporate profit margins were high, Schnabel added.

☆ ECB may need to raise rates for longer than anticipated: Kazimir
▼ + stars: | 2023-05-09 | by ( ) www.reuters.com time to read: +2 min

FRANKFURT, May 9 (Reuters) - The European Central Bank may need to raise interest rates for longer than currently anticipated, and September could be the earliest moment when policymakers can judge whether past rate hikes have been effective, ECB policymaker Peter Kazimir said on Tuesday. The ECB has lifted rates at each of its past seven meetings to fight a historic surge in consumer prices and policymakers have signalled further hikes to come as inflation pressures continue to build. "Based on today's data, we will have to keep raising interest rates for longer than anticipated," Kazimir, Slovakia's central bank chief, said in a blog post. The ECB sees inflation falling under 3% by the final quarter of this year, then taking almost two more years to ease back to its 2% target. "The development of core inflation, the continued buildup of wage pressures, and high-profit margins call for vigilance and reconfirm the need to continue on our path," Kazimir said.

☆ Euro zone inflation could hold above target -ECB survey
▼ + stars: | 2023-05-05 | by ( ) www.reuters.com time to read: +2 min

FRANKFURT, May 5 (Reuters) - Euro zone inflation could be lower in the coming years than previously expected but may stay above the European Central Bank's 2% target further out, the bank's Survey of Professional Forecasters showed on Friday. The ECB's quarterly Survey of Professional Forecasters, a key input in policy deliberations, now sees 2023 inflation at 5.6%, down from 5.9% expected three months ago, while the 2024 projection was cut to 2.6% from 2.7%. Expectations for underlying inflation were only lifted for 2023, however, and all future projections remained unchanged, including the 2% reading in the "longer term". The survey also sees a faster decline in unemployment than the previous survey with the rate falling to 6.8% this year versus 7% seen previously. At 6.5%, unemployment is already far below this reading, however, and ECB policymakers are concerned that the labour market is getting overheated, prolonging high inflation.

☆ Euro zone companies are slowing price hikes - ECB poll
▼ + stars: | 2023-05-05 | by ( ) www.reuters.com time to read: +1 min

FRANKFURT, May 5 (Reuters) - Euro zone companies are raising prices at a more moderate pace as their costs stabilise, demand cools and competition mounts, although growing wages remain a concern, according to a European Central Bank survey published on Friday. read moreThe central bank's latest poll of 61 large euro zone companies from outside the financial sector may give it some comfort, with companies reporting slower price growth, albeit with differences among sectors. Labour costs were rising, with wages expected to rise by 5% this year -- unchanged from the previous survey round in February. This meant that service providers, which are particularly sensitive to labour costs, continued to anticipate strong price hikes. By contrast, companies that sell consumer goods, particularly non-essential ones, saw price hikes "becoming more difficult".

"We are not pausing - that is very clear," ECB President Christine Lagarde told a press conference. NOT FED DEPENDENTShe also dismissed the notion that the ECB would have to pause if its U.S. counterpart did so, saying the ECB was "not Fed-dependent". The German 10-year yield , the euro zone benchmark, fell as much as 7 basis points to a one-month low of 2.18%. "In a nod to the hawks, the ECB hinted at 'future decisions' in the plural," Holger Schmieding at Berenberg said. Firms in the services sector especially have complained of labour shortages, suggesting that more wage pressures could come this summer.

But it made clear that further action was likely given mounting wage and price pressures. "We are not pausing - that is very clear," ECB President Christine Lagarde told a press conference. The ECB move, a slowdown after three consecutive 50 basis point increases, comes only days after euro zone banking data showed the biggest drop in loan demand in over a decade. That suggests previous rate rises are working their way through the economy and that ECB policies are now restricting growth. Reuters GraphicsPolicymakers had been split in the run up to Thursday's meeting between a 25 basis point and a 50 basis point rise, but markets and economists had overwhelmingly bet on the smaller increase after soft data in recent weeks and similar moderation by other big central banks, most recently the Fed on Wednesday.

Lenders wasted little time in charging more for loans when interest rates rapidly rose from an almost 15-year slumber around zero last year, but most have dragged their feet on boosting deposit rates paid to millions of their customers. Money market funds are proving popular among savers seeking bigger returns on their cash as high levels of inflation persist. Data from Refinitiv Lipper showed more than 34 billion euros ($37.6 billion) of net flows into European money market funds in March, the best-selling asset type that month. Fidelity International also reported an 8% year-on-year uplift in flows into money market funds on its investment platform between Jan. 1 and April 26. Some lawmakers have criticised banks for the mismatch between what they charge borrowers and the interest rates offered to savers.

☆ ECB to stop reinvesting cash in largest bond scheme
▼ + stars: | 2023-05-04 | by ( ) www.reuters.com time to read: +2 min

"The Governing Council will keep reducing the Eurosystem’s asset purchase programme portfolio at a measured and predictable pace," it said. "In line with these principles, the Governing Council expects to discontinue the reinvestments under the APP as of July 2023." Redemptions fluctuate, but about 148 billion euros' worth of debt held under the APP expires in the second half of the year. That means a halt to reinvestment would see an extra 58 billion euros' worth of maturities on top of the currently scheduled 15 billion euros per month. At 7.7 trillion euros, the ECB's balance sheet is already more than a trillion euros below its peak size but remains well above its historical average.

☆ All ECB policymakers but one approve small hike with more to come -sources
▼ + stars: | 2023-05-04 | by ( ) www.reuters.com time to read: +1 min

Austria's Robert Holzmann was the sole holdout as the euro zone's central bankers decided on a 25-basis-point rate increase, but he lacked voting rights due to a scheduled rotation on the ECB's Governing Council, the sources said. Holzmann did not immediately respond to a request for comment, and an ECB spokesman declined to comment. Some policymakers, they said, privately anticipate at least two if not three more hikes by the ECB, which has already raised rates seven times since last July by a total 375 basis points. Policymakers at Thursday's meeting were unanimous that the ECB should not sell bonds under its APP even after it stops replacing those that mature in July, the sources said. Reporting By Francesco Canepa, Balazs Koranyi and Frank Siebelt, editing by Mark HeinrichOur Standards: The Thomson Reuters Trust Principles.

A 25 basis point move, a slowdown after three straight 50 basis point hikes, appears the most likely outcome, although the bigger increase is still a possibility at what is almost certainly not the end of a historic tightening cycle. Markets see an 80% chance of a 25 basis point move while the vast majority of economists polled by Reuters were also betting on the smaller hike. Supporting a possible ECB downshift, the U.S. Federal Reserve lifted rates by 25 basis points on Wednesday and signalled it may pause further increases. At 3%, the ECB's deposit rate is already restricting economic activity, and underlying inflation has also stopped rising - at least for the time being. The ECB will announce its policy decision at 1215 GMT and Lagarde will hold a press conference at 1245 GMT.

☆ Euro zone inflation picks up but core unexpectedly slows
▼ + stars: | 2023-05-02 | by ( ) www.reuters.com time to read: +3 min

FRANKFURT, May 2 (Reuters) - Euro zone inflation accelerated last month but underlying price growth eased unexpectedly, adding to arguments for a smaller interest rate hike at the European Central Bank's regular policy meeting on Thursday. Overall price growth in the 20 nations sharing the euro currency picked up to 7.0% in April from 6.9% a month earlier, Eurostat said on Tuesday, in line with expectations in a Reuters poll of economists. Excluding volatile food and fuel prices, core inflation slowed to 7.3% from 7.5%, while an even narrower measure, which excludes alcohol and tobacco, slowed to 5.6% from 5.7%, coming below forecasts for 5.7% for its first decline since last June. In a hopeful development for the ECB, processed food, alcohol and tobacco inflation slowed a full percentage point to 14.7%, suggesting that a long-awaited turnaround in food prices may now be happening. Services inflation accelerated to 5.2% from 5.1% but the price growth of non-energy industrial goods, another crucial segments, slowed to 6.2% from 6.6%.

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%.

In March, depositors fled Silicon Valley Bank (SIVB.O), withdrawing $42 billion in 24 hours, some via their mobile phones. Information about the bank's difficulties spread fast online, creating a social media-driven bank run. Officials said the bank turbulence added urgency to discussions of a European Commission proposal to broaden the EU's bank resolution framework, now applied to just over 100 of the biggest European banks, to smaller and medium-sized lenders. The proposal, called Crisis Management and Deposit Insurance (CMDI) was requested by EU finance ministers in mid-2022. It would ensure that the resolution of smaller banks could be paid for from the EU's resolution fund, financed by banks, rather than by taxpayers.

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.

☆ Some ECB governors doubted 'immaculate disinflation' in March
▼ + stars: | 2023-04-20 | by ( ) www.reuters.com time to read: +3 min

But some of its 26 policymakers expressed doubts about what they called an "immaculate disinflation", the ECB's account of the March 15-16 meeting showed. a return of inflation to target with very low cost in terms of lost output)," the ECB said in the account. "There were doubts about whether the projected lower wage growth towards the end of the horizon in the March projections was justified," the ECB said. Others argued that it was consistent to revise down nominal wage growth while cutting inflation forecasts. "Members widely reiterated that developments in profits and mark-ups warranted constant monitoring and further analysis on an equal footing with developments in wages," the ECB said.

☆ Core euro zone inflation edges up in March, keeping ECB on alert
▼ + stars: | 2023-04-19 | by ( Balazs Koranyi | ) www.reuters.com time to read: +3 min

But ECB policymakers are now getting worried that high energy costs have seeped into the broader economy and linger in everything from services to wages, making inflation more difficult to tame. The ECB's main worry is that services inflation, now at 5.1%, is simply too quick and could be signalling that wages are becoming a key problem as services prices are predominantly determined by labour costs. Another issue is that food inflation keeps accelerating and this has an oversized impact on consumers' inflation perception, potentially changing spending behaviour and pressuring wage demands. Unprocessed food inflation picked up to 14.7% last month from 13.9% in February. But this rate is inconsistent with the ECB's 2% inflation target, so disinflation could be painfully slow.

☆ Euro zone current account surplus widens in February
▼ + stars: | 2023-04-19 | by ( ) www.reuters.com time to read: 1 min

FRANKFURT, April 19 (Reuters) - The euro zone's current account surplus widened in February as imports fell thanks lower energy costs and already large net exports of services remained broadly steady, data from the European Central Bank showed on Wednesday. The 20-nation bloc's adjusted current account surplus increased to 24.32 billion euros in February from 18.63 billion a month earlier. Based on unadjusted data, it was 21.27 billion euros after a 705 million deficit in January. In the 12 months to February, the current account recorded a deficit equal to 0.9% of GDP as Russia's war in Ukraine pushed up energy costs and the bloc's import bill. The euro zone had posted a 1.8% surplus a year earlier.

☆ Euro, dollar status should not be taken for granted - ECB's Lagarde
▼ + stars: | 2023-04-17 | by ( ) www.reuters.com time to read: 1 min

FRANKFURT, April 17 (Reuters) - The United States and the euro zone should not take the international status of their currencies for granted as countries such as China and Russia seek to create their own systems. "These developments do not point to any imminent loss of dominance for the U.S. dollar or the euro," Lagarde said in a speech. "So far, the data do not show substantial changes in the use of international currencies." "But they do suggest that international currency status should no longer be taken for granted," she said at the Council on Foreign Relations in New York. Reporting by Balazs Koranyi and Francesco CanepaOur Standards: The Thomson Reuters Trust Principles.

Her comments were echoed by others who feel the narrative shared by three top central banks of relatively cost-free disinflation rests on shaky ground. Among the Fed, ECB and BoE, only the British central bank projects a recession will be needed to slow inflation - only a mild one at that. U.S. central bank officials have split the difference, projecting a modest one-percentage-point rise in the unemployment rate this year from its near-historic low of 3.5%, and slow, but continued, economic growth. Martins Kazaks, Latvia's central bank chief, said the risk of a recession was still "non-trivial," with a host of factors still putting pressure on prices. For the Fed, different policymakers offer different ideas about the forces that will lower inflation as high interest rates slowly cool demand.

WASHINGTON, April 17 (Reuters) - Just a month after the biggest banking crisis in more than a decade, the world's top economic and financial policymakers gathered in Washington and said surprisingly little about financial system stability - at least publicly. Some officials conveyed a sense that banking system safety was further down the priority list of global economic problems. "But it's still something where we need to stay vigilant and address potential risks which may emerge in our financial system," Dombrovskis told reporters. He added that the European Union's banking system was stable, well capitalized with ample liquidity. But during the IMFC's closed meeting, the possible spillovers from financial stability risks were a main topic, Ukrainian Finance Minister Serhiy Marchenko told Reuters.

☆ Euro, dollar status should not be taken for granted -ECB's Lagarde
▼ + stars: | 2023-04-17 | by ( ) www.reuters.com time to read: +2 min

FRANKFURT, April 17 (Reuters) - The United States and the euro zone should not take the international status of their currencies for granted as countries such as China and Russia seek to create their own systems. "These developments do not point to any imminent loss of dominance for the U.S. dollar or the euro," Lagarde said in a speech. "So far, the data do not show substantial changes in the use of international currencies." "But they do suggest that international currency status should no longer be taken for granted," she said at the Council on Foreign Relations in New York. Around 60% of the world's foreign exchange reserves and international debt is denominated in dollars, with the euro a distant second at 20%, according to data compiled by the ECB.

☆ Germany's Buch seen as favorite to be new ECB top supervisor, sources say
▼ + stars: | 2023-04-15 | by ( Balazs Koranyi | ) www.reuters.com time to read: +3 min

WASHINGTON, April 15 (Reuters) - Three women are seen as the top contenders to become the European Central Bank's new supervisory chief, with Germany's Claudia Buch considered the clear favorite, conversations with a dozen sources with direct knowledge indicate. The ECB oversees just over a hundred of the euro zone's biggest banks and needs to pick a new top supervisor to replace Andrea Enria. His five-year term expires at the end of this year, just as sharply rising interest rates challenge banks' business models. Donnery, a deputy governor at Ireland's central bank, is seen as more of a long shot, the sources said. The sources added that the selection process has yet to start, so all discussions about the candidates are still informal.

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