ECB Watch '22

The cost of living for the 16 nations that share the euro currency rose to 5.1% in January, despite expectations for a sharp drop to 4.4%. December’s figure had come in at 5.0%

The ECB’s Governing Council is meeting this week, with an announcement due on Thursday afternoon. The euro zone’s central bank is set to concentrate on inflation, geopolitical risks, the recent rise in bond yields and its implications for financing conditions.

Another key question will be how independent monetary policy can be set in the region, at a time when banks like the U.S. Federal Reserve are entering a forceful tightening cycle.

“Inflation continues to surprise to the upside, the U.S. Fed looks set to raise rates up to six times this year, starting on 16 March,” said Holger Schmieding, a chief economist with Berenberg Bank, in a research note.

“Against this backdrop the debate at the European Central Bank will likely become even more controversial than before.”

On Thursday, the market will watch for whether ECB President Christine Lagarde will come out with changes to previous statements that a rate hike is “very unlikely” in 2022. Or whether there will be a tweak in the ECB’s assessment over the “transient” nature of the current spike in inflation.

Central Bank governor Gabriel Makhlouf has said the European Central Bank (ECB) “needs to act” on inflation and should move to end quantitative easing as soon as next month.

In remarks to Ibec’s National Council, Mr Makhlouf said the current level of inflation was “concerning” and hitting older people, and lower income and rural households the hardest.

Annual inflation in Ireland hit 7pc in April – the highest level in more than 21 years, according to the Central Statistics Office. Mr Makhlouf said it would average 6.5pc over the course of 2022.

That figure put inflation far above the ECB’s 2pc medium-term objective, said Mr Makhlouf, adding that the ECB governing council should stop its bond buying in the market by next month or, at the latest, July.

“So when the evidence changes, we should not hesitate to change our approach,” he said. “The balance of advantage has tilted decisively towards the need for further action.”

In other news, Michael Noonan expresses concern that house prices have gone up ‘a bit much, now’ and Billy Gates is alarmed at reports he’s been hearing about vaccine side effects.

I’ve no doubt inflation is running really hot right now in the euro, maybe 5-7%, but a major problem is Italy and the potential risk of default if rates tick up even slightly.

Lagarde is a complete liability and completely out of her depth. I think they are hoping U.S rate changes slow global inflation down and china gets back to normal soon, the problem is our continued sanctions on russian gas and oil means we are really put the squeeze on ordinary people. if the war in ukraine continues for too long energy inflation in the eu could mean 20% inflation…

The European Central Bank is likely to raise its deposit rate out of negative territory by the end of September and could lift it further if it sees inflation stabilizing at 2%, ECB President Christine Lagarde said on Monday.

“Based on the current outlook, we are likely to be in a position to exit negative interest rates by the end of the third quarter,” Lagarde said in a blog post published on the ECB’s website.

The ECB’s deposit rate is currently -0.5%, meaning banks are charged to park cash at the central bank.

So 50bps by October. Tiny, but may be psychologically important.

ECB warns a house price correction is looming as interest rates rise

House prices rose almost 10 per cent in the euro zone last year, the fastest rate for more than two decades, according to data from Eurostat, the European Commission’s statistics bureau. They could fall between 0.83 and 1.17 per cent for every 0.1 percentage point increase in mortgage lending rates, after adjusting for inflation, the ECB calculated.

The most recent official Irish figures for property prices from the Central Statistics Office show an annual climb of more than 15 per cent last month.

The Bundesbank recently warned that German banks were becoming too complacent about the risk of borrowers defaulting and the potential for interest rates to rise, pushing up the amount of capital lenders must put against their mortgages.

Some Germans have discovered Ireland’s lax bankruptcy laws already…

Why German nationals are going bankrupt from Kilkenny and Carlow

A law firm is helping German nationals to go through bankruptcy in Ireland, far from the glare of publicity at home
12ft |

Where’s Mein Nama :getmecoat:

We will see another 50bps increase by the Fed this week - it could easily be 75bps.

And the BoE will increase 25bps on Thursday.

The Euro is back down at $1.04. Tick tock

European Central Bank last-minute meeting to look at market conditions (cnbc.com)

European Central Bank holds emergency meeting to discuss market rout

Borrowing costs for many nations have risen sharply in recent days. In fact, earlier on Wednesday a measure known as Europe’s fear gauge — the difference between Italian and German bond yields which is widely watched by investors — widened to its highest margin since early 2020. The yield on the 10-year Italian government bond also passed the 4% mark earlier this week.

The moves in the bond market, which highlight nervousness among investors, were linked to concerns that the central bank will be tightening monetary policy more aggressively than previously expected.

The market reaction so far suggests that some market players are expecting the ECB to address concerns over financial fragmentation and indeed provide some clarity about what sort of measures it might take to support highly indebted nations.

The ECB’s decision to meet Wednesday also comes just hours ahead of a rate decision by the U.S. Federal Reserve. Market expectations point to a 75-basis-point rate hike, the biggest increase since 1994.

Speaking to CNBC’s Karen Tso Wednesday, France’s Finance Minister Bruno Le Maire said he would not be concerned if the Fed’s moves dent economic growth in France. “The key point now and for the coming months is to reduce the level of inflation,” he said.

any speculation on where we go next in the ECB? with the FED and other CB’s aggressively hiking yesterday’s meeting signaled a potential Eurobond launch to close the gap between Ita and Ger.

with the amount of Gov. debt and a weak global economy I’m not certain that we will see large rate hikes across a series of years, perhaps 1% over the course of 2022, and maybe .50 bps next year but if the recession that we see threatened arrives all CB’s will be rowing back by the end of next year I feel.

That’s some percentage increase on a zero base y-axis. Germany shows similar trend from a negative starting point 6 months ago. Whatever happens is likely to be forced by circumstance rather than a long term cohesive plan. We already know that it is impossible for a country to leave the euro or it would have happened when everything pointed to Greece doing so. Can the ECB bail the whole eurozone out while retaining the viability of the euro as a currency? Seems doubtful.

God only knows what they will try next. The rational or logically minded can be at a disadvantage dealing with them.
Even at EU level overall, Von Der Leyen is still trying to push for Digital Covid Passes, while eventually Spain and Italy had to see sense and drop the anti - tourist restrictions ahead of the summer.
We only need to look at where we were at the start of the year with mandatory vaccinations in Austria, now, not six months on, not a peep out of them.

The ECB made themselves look like fools again with their transitory inflation forecasts back in January.
Then they were going to hold firmly to ZIRP while the US and UK started increasing rates. Then they had to climb down on their own rate rises, and they are on the back foot again, caught out by ‘Sovereign’ bond yield spikes and a Euro rapidly dipping to parity with the USD.

The underlying theme for European economics and Ireland’s place in the pecking order is the European pensions timebomb. This has been a dominating force in Ireland for the last 30 years, driving the Celtic Tiger, housing bubble 1.0, Nama, the bailout of the bond holders, mass immigration, and diversity and inclusion. All to feed that pensions monster, while greasing the palms, and paying tribute to the local gombeen man, all the while not facing up to economic, cultural, and social realities.

Stocks across Europe have seen little or no growth for years, despite the massive societal price that is being paid for mass migration, and Diversity and Inclusion. Pensions hold lots of Sovereign bonds, and property of course. Property has been squeezed to death. Yield can only come from Bond rate increases and that means interest rate rises.
Throw in $100 oil and all the momentum is there, as it was in 08, but as we saw many, many times before from the political elites/menace/plutocrats we can never underestimate what they will do to fight their way out of a corner for their own self preservation.
I guess there is a reason Draghi has been placed in Rome as Il Duce

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Something big about to break?

Yea I see tension around tomorrow or something. Not sure why. Watch markets etc. etc.

The Menace doesn’t usually give a heads up like this. Assume the Menace is losing control but is not going to tell you how or what exactly.

Deutsche Bank stock dropped 12% today and I can’t find even a feeble explanation why in the news. The horrors from the 2008 era supposedly lurking in its balance sheet were never really dealt with plus they’ve been involved in all manner of shady shit ever since.

She Knows alright.

“There are known knowns, things we know that we know; and there are known unknowns, things that we know we don’t know. But there are also unknown unknowns, things we do not know we don’t know.

Donald Rumsfield.

And the award for ‘funniest headline of the year’ goes to:

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