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☆ Stubborn inflation keeps ECB on course for more rate hikes
▼ + stars: | 2023-03-31 | by ( Francesco Canepa | ) www.reuters.com time to read: +3 min

"The pressure on the ECB to continue raising interest rates remains high," Commerzbank economist Christoph Weil said. Consumer prices in the euro zone rose by 6.9% in March after an 8.5% increase in February, implying the biggest drop since Eurostat started collecting data in 1991. Analysts polled by Reuters had expected headline inflation in the 20 countries that share the euro to come in at 7.1% and core inflation at 7.5%. Strengthening the case for more tightening, euro zone unemployment remained stubbornly low at 6.6%. This is a concern for policymakers who fear it could give workers greater bargaining power in salary negotiations and lead to higher wage increases that could perpetuate high inflation.

☆ Euro zone inflation posts record drop but core prices accelerate
▼ + stars: | 2023-03-31 | by ( ) www.reuters.com time to read: +1 min

FRANKFURT, March 31 (Reuters) - Inflation in the euro zone dropped by the most on record in March but growth in core prices accelerated, Eurostat data showed on Friday, likely strengthening the case for more interest rate hikes by the European Central Bank. Consumer prices rose by 6.9% in March after an 8.5% increase in February, implying the biggest deceleration since Eurostat started collecting data in 1991. But an index that excludes energy and food prices, known by economists as core inflation and seen as a better gauge of the underlying trend, accelerated slightly to 7.5% from 7.4% in February. Analysts polled by Reuters had expected headline inflation in the 20 countries that share the euro to come in at 7.1% and core inflation at 7.5%. After a record streak of rate rises, the ECB has refrained from committing to more hikes, saying this will depend on whether the current turmoil in the banking sector subsides and on data including underlying inflation.

☆ Morning Bid: Central banks try to see through stress
▼ + stars: | 2023-03-23 | by ( ) www.reuters.com time to read: +4 min

A look at the day ahead in U.S. and global markets from Mike DolanEven with a nod to greater banking stress, the major central banks all seem determined to tighten the monetary screw another notch. With Treasury Secretary Janet Yellen's pushback against suggestions of a blanket insurance of all U.S. banking deposits unnerving investors again after the Fed decision, few believe the financial stress has fully dissipated. Even though stock markets swooned after the Yellen comments on Wednesday, S&P500 futures were back up smartly ahead of Thursday's open. European bourses and banking stocks were only a touch lower in the face of the latest European rate rises. The dollar hit its lowest since early February but regained its footing ahead of the U.S. open and BoE decision.

☆ Morning Bid: Signs of confidence re-emerge after bank storm
▼ + stars: | 2023-03-21 | by ( ) www.reuters.com time to read: +2 min

While UBS shares were hammered in early trading on Monday after its shotgun marriage with troubled Credit Suisse following an intervention by Swiss authorities, the bank's shares pared most of the losses towards the close. European Central Bank President Christine Lagarde said the market turmoil might do some of the ECB's work for it in dampening demand and inflation. Markets have been on high alert for central banks to raise interest rates sharply to cope with high inflation. ECB policymaker Robert Holzmann watered down his recent call for three more rate increases of 50 basis points in quick succession. Policy decision is on WednesdayReporting by Anshuman Daga; Editing by Bradley PerrettOur Standards: The Thomson Reuters Trust Principles.

March 17 (Reuters) - European Central Bank supervisors met to tackle growing cracks in the banking system on Friday after a $30 billion lifeline for U.S. lender First Republic Bank (FRC.N) eased fears of its imminent collapse. The rescue package came less than a day after Credit Suisse (CSGN.S) clinched an emergency central bank loan of up to $54 billion to shore up its liquidity. The two deals helped restore some calm to global markets, after a torrid week for banking stocks. "French and European banks are very solid," ECB policymaker and French central bank governor Francois Villeroy de Galhau, told BFM business radio. Japan's finance ministry, financial regulator and central bank said they would meet on Friday to discuss developments.

☆ ECB's Villeroy: rate hike signals strong confidence in European banks
▼ + stars: | 2023-03-17 | by ( ) www.reuters.com time to read: +1 min

PARIS, March 17 (Reuters) - The European Central Bank's decision to raise interest rates by half a point on Thursday reflects the central bank's priority of fighting inflation and also signals strong confidence in the solidity of European banks, French ECB policymaker Francois Villeroy de Galhau said on Friday. "French and European banks are very solid," Villeroy, who is also governor of the French central bank, said on BFM business radio. "I think we sent a signal of confidence that is strong and dual. It reflects both confidence in our anti-inflation strategy and confidence in the solidity of European and French banks," Villeroy said. While the ECB had "the tools to ensure the liquidity of banks", Villeroy said it was unlikely it would have to use them as "European banks are not in the same situation as U.S. banks".

☆ Relief rally on bank rescue lifts riskier currencies; dollar slips
▼ + stars: | 2023-03-17 | by ( Rae Wee | ) www.reuters.com time to read: +4 min

The Aussie jumped 0.76% to $0.6708 in Asia trade on Friday, while the kiwi rose 0.69% to $0.6239. The move followed Credit Suisse's (CSGN.S) announcement earlier on Thursday that it would borrow up to $54 billion from the Swiss National Bank, after the central bank threw a financial lifeline to the embattled Swiss lender. Earlier in the week, the Swissie had plunged the most against the dollar in a day since 2015. It was last 0.56% higher at 133.01 per dollar, on track to rise more than 1% for the week. Reporting by Rae Wee; Editing by Bradley Perrett and Christopher CushingOur Standards: The Thomson Reuters Trust Principles.

☆ Dollar slips as banks rescue makes room for relief rally
▼ + stars: | 2023-03-17 | by ( Rae Wee | ) www.reuters.com time to read: +3 min

ECB policymakers sought to reassure investors that euro zone banks were resilient and that if anything, the move to higher rates should bolster their margins. The euro's reaction to the decision was fairly muted, though it managed to eke out a 0.3% gain on Thursday. Earlier in the week, the Swissie had plunged the most against the dollar in a day since 2015. The Japanese yen remained elevated, and was last roughly 0.3% higher at 133.30 per dollar. "The turmoil in the banking sector is complicating the outlook for Fed policy, but the impact may be more nuanced than the Fed simply reversing course," said Philip Marey, senior U.S. strategist at Rabobank.

☆ ECB policymakers agreed on big hike only after Credit Suisse rescue - sources
▼ + stars: | 2023-03-16 | by ( ) www.reuters.com time to read: +1 min

FRANKFURT, March 16 (Reuters) - European Central Bank policymakers only agreed on another major increase in interest rates on Thursday after Credit Suisse secured a lifeline from the Swiss central bank and financial markets stabilised, three sources told Reuters. Some called for leaving rates unchanged and to wait for financial markets to settle down, rather than raise borrowing costs for a sixth time and risk making matters worse, the sources added. But the Swiss National Bank's decision to bankroll Credit Suisse with a 50-billion-franc loan overnight helped steady financial markets and marked a turning point for going ahead with the planned rate increase, the sources said. But the sources said this was never discussed, with the discussion focussing on a 50-basis-point move or none at all. Reporting By Francesco Canepa and Balazs Koranyi; Editing by Toby ChopraOur Standards: The Thomson Reuters Trust Principles.

[1/2] European Central Bank (ECB) President Christine Lagarde speaks during a news conference following the ECB's monetary policy meeting in Frankfurt, Germany March 16, 2023. Reuters Graphics Reuters GraphicsPresident Christine Lagarde noted it was impossible to determine the future rate path amid "completely elevated" uncertainty stemming from market ructions. "Given financial instability risks, there's growing uncertainty on future ECB actions beyond this pre-signalled rate hike," said Daniele Antonucci, chief economist and macro strategist at Quintet Private Bank. Piet Christiansen, chief analyst at Danske Bank, said he was sticking to a call for a 4% peak ECB rate. "Unless this turns into a macroeconomic crisis then we are ripe for a sell-off and a repricing of rate hike expectations," he said.

March 15 (Reuters) - Swiss regulators said Credit Suisse (CSGN.S) can access liquidity from the central bank if needed, racing to assuage fears around the lender after it led a rout in European bank shares on Wednesday. The U.S. Treasury is monitoring the situation around Credit Suisse and is in touch with global counterparts about it, a Treasury spokesperson said. They slid again as a crisis of confidence gripped Credit Suisse on Wednesday after its largest investor said it could not provide Credit Suisse with more financial assistance because of regulatory constraints. The logo of Swiss bank Credit Suisse is seen in front of an office building in Zurich, Switzerland October 26, 2022. Ralph Hamers, CEO of Credit Suisse rival UBS (UBSG.S) said market turmoil has steered more money its way.

Two supervisory sources told Reuters that the European Central Bank (ECB) had contacted banks on its watch to quiz them about their exposures to Credit Suisse. The Swiss National Bank declined to comment on Switzerland's second-largest bank, after its largest investor said it could not provide Credit Suisse with more financial assistance because of regulatory constraints. Credit Suisse had appealed to the Swiss National Bank and Swiss financial watchdog FINMA for a public show of support, the Financial Times reported. The logo of Swiss bank Credit Suisse is seen in front of an office building in Zurich, Switzerland October 26, 2022. Ralph Hamers, CEO of Credit Suisse rival UBS (UBSG.S) said market turmoil has steered more money its way.

The ECB has contacted banks on its watch to quiz them on their exposure to the struggling Swiss lender, two supervisory sources told Reuters. Money market pricing suggested traders now saw less than a 20% chance of a 50 basis point rate hike at Thursday's scheduled ECB meeting. That's down from as high as 90% at the start of the session , when a source-based story saying ECB policymakers were leaning towards a half-percentage-point rate hike was published. While rapidly rising interest rates across major economies have raised concern about potential pressure points, many analysts still expected a large ECB hike given high inflation. Pictet's Ducrozet said the ECB could also ease collateral rules for banks, though not as much as the Federal Reserve.

☆ ECB deposit rate to peak at 3.75% or higher as inflation stays sticky: Reuters poll
▼ + stars: | 2023-03-10 | by ( Jonathan Cable | ) www.reuters.com time to read: +3 min

[1/2] Signage is seen outside the European Central Bank (ECB) building, in Frankfurt, Germany, July 21, 2022. All 60 economists polled by Reuters March 7-9 believed her and said the bank's deposit rate would rise 50 basis points to 3.00% on Thursday. Medians in the poll showed the euro zone's central bank adding 25 basis points at the following three meetings in May, June and July to give a terminal deposit rate of 3.75%, higher than the 3.25% peak expected in a February poll. While the median showed the deposit rate peaking at 3.75% it was a view held by only 19 of 60 economists surveyed. There is now only a 34% chance of a recession within the coming year, the poll found, down from 50% in a January poll.

CASE FOR A SWIFT RETREAT1/ ENERGY PRICESTumbling energy prices are pulling down headline inflation. U.S. inflation rose 6.4% in January, the smallest rise since October 2021, from a 9.1% high last June. Instead, corporate profits have accounted for the lion's share of domestic euro zone price pressures since 2021, ECB data shows. A recent IMF study going back to the 1960s found that only in a small minority of cases where wages and inflation rose together for several quarters did sustained inflation result. The chief executive of Gunvor, a top oil trader, sees oil prices rising in the second half of 2023 on renewed Chinese demand.

☆ ECB survey sees moderating inflation, rising wage expectations
▼ + stars: | 2023-03-07 | by ( ) www.reuters.com time to read: +1 min

FRANKFURT, March 7 (Reuters) - Inflation expectations among euro zone consumers dropped in January but expectations for wage growth continued to rise, adding to fears wage growth will slow efforts to control prices, a European Central Bank survey showed on Tuesday. Overall inflation is now falling relatively quickly but underlying price pressures are continuing to build, in part driven by quick nominal wage growth in services, suggesting that price growth could remain far more stubborn than the ECB now expects. ECB policymakers see nominal wage growth around 5% this year, the quickest in years, and a potential headache when setting interest rates. The bank has raised rates by 300 basis points since July and promised another 50 basis point more in March. Markets now see more than 100 basis points of hikes in subsequent meetings before the deposit rate plateaus at or just above 4%.

☆ Sticky inflation fuels some of ECB's worst fears
▼ + stars: | 2023-03-02 | by ( Balazs Koranyi | ) www.reuters.com time to read: +4 min

Overall inflation eased a touch to 8.5% last month from 8.6% in January, data on Thursday showed. But nearly all the drop came from lower energy costs, while prices for most other items - including food, services and durable goods - surged again, confirming the worst fears of some ECB policymakers. A jump in underlying inflation - to 5.6% from 5.3% - reinforces already copious evidence that past price rises are filtering down into the broader economy, including via wages. "Core inflation and other measures of underlying inflation were likely to be stickier, with only limited evidence of a stabilisation so far," the ECB said in the accounts of the Feb. 1-2 meeting. "In particular, we upgrade (the rate hike view in) May from 25bp to 50bp, which takes our terminal rate forecast to 3.75% in June."

☆ ECB confronts a cold reality: companies are cashing in on inflation
▼ + stars: | 2023-03-02 | by ( Francesco Canepa | ) www.reuters.com time to read: +9 min

"It's clear that profit expansion has played a larger role in the European inflation story in the last six months or so," said Paul Donovan, chief economist at UBS Global Wealth Management. "The ECB has failed to justify what it's doing in the context of a more profit-focused inflation story." Instead, national accounts and earnings reports from listed companies are being used as proxies to paint the inflation picture. "The main story of the risks going forward is still that there's a looming wage-price spiral which should make the central bank even more aggressive in hiking interest rates." loadingloadingEven inside the ECB, labour representatives demanding higher pay for central bank staff have distanced themselves from what they described as the institution's "anti-worker bias".

☆ Dollar edges down from six-week peak, Swedish crown jumps
▼ + stars: | 2023-02-20 | by ( Samuel Indyk | ) www.reuters.com time to read: +3 min

The U.S. dollar index , which measures the dollar against six other major currencies, slipped 0.2% to 103.81. Hawkish comments from Fed officials have also underpinned the U.S. dollar, as they signalled interest rates would need to rise to quash inflation. The euro fell 1.1% against the Swedish crown to 11.05 crowns while the dollar was down 1% to 10.3405. The euro was little changed against the dollar at $1.0690, just above Friday's six-week low of $1.06125. The Australian dollar rose 0.6% to $0.6918 ahead of minutes from the Reserve Bank of Australia's latest policy meeting on Tuesday.

☆ Dollar edges lower from six-week peak, Swedish crown jumps
▼ + stars: | 2023-02-20 | by ( Samuel Indyk | ) www.reuters.com time to read: +3 min

The U.S. dollar index , which measures the dollar against six other major currencies, slipped 0.1% to 103.91. Hawkish comments from Fed officials have also underpinned the U.S. dollar, as they signalled interest rates would need to rise to quash inflation. The euro fell 1.1% against the Swedish crown to 11.059 crowns while the dollar was down 0.8% to 10.3604. The euro was little changed against the dollar at $1.0687, just above Friday's six-week low of $1.06125. "Euro rates are probably likely to stay at higher levels, whereas we think dollar rates will more easily turn lower," Turner added, which he said could support the euro in the first half of the year.

☆ Factbox: Key ECB policymaker comments since Feb rate hike
▼ + stars: | 2023-02-17 | by ( ) www.reuters.com time to read: +4 min

By smoothing our policy rate hikes – that is, moving in small steps – we can ensure that we calibrate (policy) more precisely. Boris Vujcic, Croatian central bank governor, Feb. 10"I would agree that we are likely to see more rate action beyond March." Joachim Nagel, German central bank chief, Feb. 7"From where I stand today we need further, significant rate hikes." Pierre Wunsch, Belgian central bank chief, Feb. 3"I don’t think we're going to move from 50 basis points (in March) to zero. Gediminas Simkus, Lithuanian central bank chief, Feb. 3"The March rate hike is not the last one.

☆ ECB 50-basis-point hike in March a done deal, May and June undecided
▼ + stars: | 2023-02-16 | by ( Jonathan Cable | ) www.reuters.com time to read: +3 min

ECB President Christine Lagarde said at a news conference this month that the euro zone's central bank would add 50 basis points to the deposit rate. Economists took her at her word, with all 57 of them polled in the Feb. 10-15 period expecting a deposit rate hike to 3.00% at the March 16 meeting. The ECB will follow up on March's move with a further 25-basis-point lift next quarter, medians showed, giving a terminal deposit rate of 3.25% and a refinancing rate of 3.75%. In response to an additional question, an overwhelming majority - 26 of 28 - said the risk was the terminal deposit rate ends higher than they expect, rather than lower. Markets are currently pricing in a terminal deposit rate of 3.50%.

☆ ECB must act decisively to anchor inflation expectations, Nagel says
▼ + stars: | 2023-02-09 | by ( ) www.reuters.com time to read: +1 min

FRANKFURT, Feb 9 (Reuters) - The European Central Bank must act decisively to prevent inflation expectations from rising far above its 2% target, ECB policymaker Joachim Nagel said on Thursday, reaffirming his call for more interest rate increases. "Decisive monetary policy action is necessary to reduce the risk of an unanchoring of long-term inflation expectations," Nagel, the Bundesbank's president, said in a slide accompanying a speech. Economists' and investors' expectations for inflation in the euro area from 2025 onwards are at or just above 2% but the ECB has said it will monitor the situation in case there is any further rise. The central bank for the euro zone raised interest rates by half a percentage point last week and pencilled in a move of the same magnitude for next month. Reporting By Francesco Canepa; Editing by Christina FincherOur Standards: The Thomson Reuters Trust Principles.

☆ ECB's Knot sees big May rate hike if core inflation doesn't fall: MNI
▼ + stars: | 2023-02-08 | by ( ) www.reuters.com time to read: +2 min

FRANKFURT, Feb 8 (Reuters) - The European Central Bank may extend its streak of large interest hikes into May if core inflation doesn't ease by then, ECB policymaker Klaas Knot said on Wednesday. "Once we see a clear and decisive turn in underlying inflation dynamics, I...expect us to move to smaller steps." He expected inflation in core goods to start falling too, also thanks to easing supply constraints. But he warned that inflation in core services may prove sticker and may get a further boost from rising wages. He expected workers to gain more bargaining power in salary negotiations as the economy holds up better than the ECB expected only a few weeks ago.

☆ Euro zone inflation seen just above ECB's target in 2025, poll shows
▼ + stars: | 2023-02-03 | by ( ) www.reuters.com time to read: +1 min

FRANKFURT, Feb 3 (Reuters) - Euro zone inflation is set to decline to 2.1% in 2025, just a shade above the European Central Bank's target, an ECB poll of economists forecast on Friday. The ECB raised interest rates for the fifth straight time on Thursday and signalled more hikes ahead, reaffirming it would stay the course in the fight against high inflation. Its Survey of Professional Forecasters, which ECB policymakers use as a key gauge of market expectations, showed economists were expecting the euro zone central bank to eventually conquer inflation - but not before another two years. Poll respondents put inflation at 5.9% this year and 2.7% the next, a slight increase from the previous survey round in October, the survey showed. They then expected inflation to fall to 2.1% in 2025, which was not part of the survey in October, and stabilise there in the long term, the survey showed.

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