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☆ ECB policymakers stick with hike plans even as recession looms
▼ + stars: | 2022-10-28 | by ( Balazs Koranyi | ) www.reuters.com time to read: +5 min

[1/2] Signage is seen outside the European Central Bank (ECB) building, in Frankfurt, Germany, July 21, 2022. But policymakers on Friday appeared to be on message that rates will keep going up. Investors now see ECB rates peaking at around 2.75%, above levels near 2.5% seen on Thursday after the ECB's rate hike and language tweaks. RECESSIONThe policymakers' reinforcement of the rate hike message comes as a recession now looks almost certain, and will likely prompt a barrage of further criticism from European leaders. But ECB chief Christine Lagarde pushed back on the criticism on Thursday, arguing that breaking inflation was the ECB's chief mission and governments could help by providing targeted support for the most vulnerable.

☆ Energy subsidies merely delay high inflation, ECB's Villeroy warns
▼ + stars: | 2022-10-15 | by ( ) www.reuters.com time to read: +1 min

WASHINGTON, Oct 15 (Reuters) - Europe's energy subsidies may reduce the current rate of inflation but only at the expense of future higher readings, potentially complicating the task of monetary policy, European Central Bank (ECB) policymaker Francois Villeroy de Galhau said on Saturday. "We should not be under the illusion that price caps reduce underlying inflation," Villeroy said in Washington on Saturday, addressing a meeting of the G30, a group of private and public financial officials. Register now for FREE unlimited access to Reuters.com Register"They may only help to reduce the risk of second round effects," he added. "Price caps, if temporary, only reduce current measured inflation at the expense of future measured inflation." Instead of broader spending increases which add to already high inflation pressures, governments should focus help on those in the greatest need of help, Villeroy argued.

☆ ECB's Lagarde sticks to rate hikes as bond debate starts
▼ + stars: | 2022-10-12 | by ( ) www.reuters.com time to read: +2 min

WASHINGTON, Oct 12 (Reuters) - European Central Bank President Christine Lagarde on Wednesday singled out interest rate increases as the best tool to fight runaway inflation in the euro zone even as a debate about mopping up excess cash got underway. Trying to fight runaway prices, the ECB has raised its rate on bank deposits to 0.75%, promised more hikes and begun a debate about whittling down its 3.3-trillion-euro ($3.20 trillion) bond holdings - legacy of its fight against deflation in the last decade. Lagarde emphasized rate hikes as the ECB instrument of choice at present even as other policymakers began publicly debating how and when to stop reinvesting some of the proceeds from the debt the central bank had bought since 2015. Also speaking in Washington, Dutch central bank chief Klaas Knot said the ECB needed at least two more rate hikes of up to 75 basis points each before reaching the neutral level, where it neither stimulates nor curbs the economy. Lagarde acknowledged the discussion about this so-called "quantitative tightening" had started and would continue.

☆ ECB closing in on rule change to shave banking profits, sources say
▼ + stars: | 2022-10-12 | by ( Balazs Koranyi | ) www.reuters.com time to read: +4 min

All sources said that a decision could come at the Oct. 27 policy meeting because there's little benefit in waiting. The benefit is that all banks are affected the same way and the ECB would not be playing favorites. They also said that this sort of accommodation is inconsistent with interest rate policy, which is being tightened. That risks putting political pressure on central banks around the euro zone. In extreme cases, central banks could even deplete their own capital, possibly forcing governments to recapitalize lenders.

☆ ECB's Villeroy lays out plan for shrinking balance sheet
▼ + stars: | 2022-10-11 | by ( ) www.reuters.com time to read: +2 min

Villeroy said it was too early to say whether the ECB should raise that rate by 50 or 75 basis points at its Oct. 27 meeting. At that point, Villeroy said the ECB should first have banks repay money borrowed under the central bank's Targeted Longer-Term Refinancing Operations (TLTRO). "The reimbursement of TLTROs comes first, and we should avoid any unintended incentives to delay repayments by banks," he said. "Here we could start earlier than 2024, maintaining partial reinvestments but at a gradually reduced pace," he said. He argued the ECB should start this unwind slowly and then accelerate, with a clearly communicated "end-point...in terms of both the terminal date and size".

The October move should then be followed by another step that takes the ECB to what policymakers call the neutral rate, which neither stimulates nor slows growth, ending a more than decade-long experiment with ultra-easy policy. "In my view, we are heading towards the range of the neutral rate by Christmas," said Rehn, 60, a potential Finnish presidential candidate who often tops opinion polls. While undefined, the neutral rate is seen somewhere between 1.5% and 2%, well above the ECB's 0.75% deposit rate. "For euro zone inflation, there is one driver above others and one anchor more important than others," Rehn said. While a downturn is increasingly likely to morph into a recession given sky-high energy prices and potential energy shortages, Rehn argued this was still a small price to pay.

☆ Crypto regulation laggards spur arbitrage risk - French central banker
▼ + stars: | 2022-09-27 | by ( ) www.reuters.com time to read: +1 min

Register now for FREE unlimited access to Reuters.com RegisterFrancois Villeroy de Galhau, Governor of Banque de France, attends the Paris Europlace International Financial Forum in Paris, France, July 12, 2022. REUTERS/Benoit TessierPARIS, Sept 27 (Reuters) - Countries that are slow to build up regulations for crypto assets could create arbitrage risks that players operating globally could exploit, the head of France's central bank said on Tuesday. read moreBut crypto assets, such as cryptocurrencies like bitcoin, are largely still unregulated globally. "We should be extremely mindful to avoid adopting diverging or contradictory regulations, or regulating too late," Villeroy told a conference on digital finance in Paris. read moreRegister now for FREE unlimited access to Reuters.com RegisterReporting by Leigh Thomas.

☆ ECB seeks to cut subsidy to banks as rate hikes leave it on hook, sources say
▼ + stars: | 2022-09-23 | by ( ) www.reuters.com time to read: +4 min

Signage is seen outside the European Central Bank (ECB) building, in Frankfurt, Germany, July 21, 2022. To fight runaway inflation, the ECB has raised the rate it pays on the 4.6 trillion euros ($4.5 trillion) worth of banks' reserves that exceed requirements from -0.5% to 0.75% in less than two months. The ECB might also change the terms of TLTRO loans, although this would potentially damage the credibility of future programmes and invite legal challenges, the sources added. Any such move is likely to displease banks and might even land the ECB in court. Dutch bank ING saw "disrupting effects on Italian money markets" if the ECB stopped remunerating part of the money borrowed by Italian banks under TLTRO.

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