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☆ ECB's next rate move likely between 50 and 75 bps, Knot says
▼ + stars: | 2022-10-30 | by ( ) www.reuters.com time to read: +1 min

AMSTERDAM, Oct 30 (Reuters) - The European Central Bank (ECB) could hike its interest rates by 75 basis points again at its next policy meeting in December, ECB governing council member Klaas Knot said on Sunday. The central bank for the 19 countries that share the euro raised the interest rate it pays on bank deposits by 75 basis points last week, taking it 1.5%, its highest level since 2009. "We will take a significant interest step again in December," Knot said in an interview with Dutch TV programme Buitenhof, adding that is was likely that the next raise would be between 50 and 75 basis points. "We are still returning interest rates towards their neutral level, for which we will also need the December meeting." "From 2023 we will play the second half, with smaller interest rate steps and by shrinking our balance sheet," the Dutch central bank president said.

☆ Analysis: Decade of central bank largesse haunts taxpayers as losses loom
▼ + stars: | 2022-10-25 | by ( Francesco Canepa | ) www.reuters.com time to read: +6 min

Signage is seen outside the European Central Bank (ECB) building, in Frankfurt, Germany, July 21, 2022. The British government, which received 120 billion pounds in profits from the BoE since 2009, has already earmarked a transfer of 11 billion pounds for the central bank. It will contribute to losses of around 40 billion euros for euro zone central banks next year, according to Morgan Stanley. They have all warned of upcoming losses and the Dutch central bank openly said it risked needing a bailout, although finance minister Sigrid Kaag later cautioned this was "not yet on the table". By contrast, central banks with less cash and higher-yielding bonds in Italy, Spain and Greece were likely to fare better.

Investors will also look to ECB boss Christine Lagarde for guidance on how the ECB views the trade-off between recession risks and inflation, and when it might pause tightening. Economists say it's too early to call a peak in inflation but the chances of one arriving soon are growing. While an inflation peak may be close if there are no additional shocks from the war in Ukraine, the retreat will be slow initially, ECB policymaker Bostjan Vasle believes. Reuters Graphics Reuters Graphics4/ Is the ECB giving away cash to banks and what will it do about it? Aggressive rate hikes from major central banks and a rout in British bonds have sparked concern about financial instability.

☆ After UK turmoil, Dutch central bank urges pension funds to review liquidity
▼ + stars: | 2022-10-19 | by ( ) www.reuters.com time to read: +3 min

AMSTERDAM, Oct 19 (Reuters) - The Dutch central bank (DNB) said on Wednesday it had called on pension funds in the Netherlands to review their readiness to weather a sudden spike in interest rates, following turmoil among British funds. A spokesperson for the bank confirmed a Financial Times report that said the funds had been asked to review their holdings of liquid assets. Dutch pension funds make less use of interest rate hedges than their British peers and benefit from the larger and more liquid eurozone government bond market. "When a rise in interest rates happens gradually, there is no liquidity risk" it said, though it noted that a liquidity crisis was still possible. Jan Mark van Mill, head of Treasury and Trading at fund manager APG, says his organization conducts monthly liquidity stress tests.

☆ Dutch central bank urges pension funds to guard against UK-style crisis - FT
▼ + stars: | 2022-10-19 | by ( ) www.reuters.com time to read: +1 min

Oct 19 (Reuters) - The Dutch central bank is calling on the country's pension funds to consider boosting holdings of cash and other liquid assets to ensure that they can avoid the turmoil that has hit the UK, the Financial Times reported on Wednesday. The officials at the Dutch central bank have asked local retirement funds to check for signs of stress, recommending that they review liquidity rules and report on any need for fire sales of assets, the report added, citing people familiar with the matter. The move comes after UK pension funds were forced to offload billions of pounds government bonds, or gilts, at distressed prices earlier this month, after an ill-fated package of tax cuts sent yields soaring, triggering margin calls on derivatives designed to protect the funds against movements in rates. Register now for FREE unlimited access to Reuters.com RegisterReporting by Rhea Binoy in Bengaluru; Editing by Kim CoghillOur Standards: The Thomson Reuters Trust Principles.

☆ ECB policymakers put balance sheet run-off on the table
▼ + stars: | 2022-10-15 | by ( Balazs Koranyi | ) www.reuters.com time to read: +3 min

"Once we will have reached neutral territory with our policy rate, it makes sense to consider the roll-off of asset purchases by limiting reinvestments," Knot said in a speech in Washington. Register now for FREE unlimited access to Reuters.com RegisterThe balance sheet run off, part of a broader scheme of monetary policy tightening, is needed as inflation is running at 10% and will stay above the ECB's 2% target for years to come. A presentation to policymakers earlier this month provided a possible timeline for a balance sheet run-off starting in the second quarter but there has been no firm decision by the 25-member Governing Council, sources told Reuters earlier. Others on the Governing Council have also said quantitative tightening should start soon but none have called for immediate action, indicating that policymakers are keen to be done with the bulk of rate hikes before dealing with the balance sheet. Knot also said that rate hikes should not end at the neutral rate, an undefined level, and the ECB will likely have to enter a territory that brakes growth.

☆ ECB could start shrinking balance sheet once rates hit neutral, Knot says
▼ + stars: | 2022-10-15 | by ( ) www.reuters.com time to read: +2 min

Knot did not specify an estimate for the neutral but said the rate should reach a range of plausible estimates. Rates hikes should not end at the neutral, however, and the ECB will likely have to enter a territory that brakes growth. "I am increasingly convinced that we need to do more than just removing accommodation to fulfil our price stability mandate," Knot said. "I do not expect policy rate hikes to come to an abrupt end," Knot said. "The farther we hike and the closer we get to restoring a credible prospect of inflation moving back to target, the smaller rate steps will likely become."

☆ 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.

☆ Regulators propose first global rules before 'crypto winter' thaw
▼ + stars: | 2022-10-11 | by ( Huw Jones | ) www.reuters.com time to read: +3 min

LONDON, Oct 11 (Reuters) - Cryptoasset companies should set aside capital like banks when undertaking similar activities, regulators proposed on Tuesday in their first global rules as a "crypto winter" wiped $2 trillion off the sector, leaving investors nursing losses. The Financial Stability Board (FSB), which coordinates financial rulemaking among Group of 20 Economies (G20), made nine recommendations for members to apply. Currently, the sector is largely unregulated in most countries, having to only comply with rules for safeguarding against money laundering and terrorist financing as regulators warn investors they risk losing every penny. "Concerns about the risks they pose to financial stability are therefore likely to come back to the fore sooner rather than later," Knot said in a letter to G20 finance ministers meeting in Washington this week. The proposals seek cross-border consistency to regulating crypto-assets, particularly as the European Union finalises groundbreaking rules to regulate the sector from 2024.

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