ECB Watch





Fairly sizeable jump from 1.1% in December to 1.8% in Jan in the Eurozone. But so called core inflation still at 0.9%.

So at what point do ECB raise rates? Overall inflation over 2% for say three consecutive months or core inflation near 2%?



@fwred a good follow. Frederik Ducrozet - Market Economist, ECB Watcher


It’s a year and a half since anyone posted on the Central Bank forum, apart from the National Debt thread (i.e. about fiscal policy) and the “Giz a Job…” thread.

I’m sure Pinsters know that monetary policy is what makes the property world go round so we should keep our eye on the ball. Trump is trying to bully the Fed but it looks like they will ignore him and keep going i.e. from zero to 3.4% by 2021.

Martin Feldstein is writing in support of Fed policy in the WSJ today so you know they are serious. Feldstein was Reagan’s economic advisor and Wall Street listens to him even when he wants to take away the punch bowl. He argues that we already have an asset-price bubble because the Fed delayed lifting rates years so its probably to late to avoid a deep recession. Of course, if the Fed chickens out now, the consequences would be even more catastrophic.

Not to worry, of course. We learned our lesson ten years ago, now the Irish economy is completely insulated from Wall Street. XX … 1543276851


US inflation is barely above 2 % and trumps tariffs is likely to moderate any further growth rates
Feldstein is an inflation hawk wanting rising rates in the throws of a recession/depression.
Some who gives better insight into the Fed policy and direction is Tim Duy


Has anyone looked at the amount of house Foreclosours in the USA. Europe looks wealthy in comparison to housing stock. America has all timber frame and asphalt singles (tar) on their roofs, and we all know what happened as forestry management in California when all the houses went up in flames. No asset value there compared with European concrete.


US inflation is on target and Trump’s tax cuts have boosted an economy already running close to capacity. Feldstein is not looking to raise rates in a recession. On the contrary, he wants to raise rates now so the Fed has scope for rate cuts during the next recession.

I see Tim Duy on Bloomberg occasionally. All due respect, not in Martin Feldstein’s league. His views won’t influence the Fed.


Fledstein wanted the Fed to raise rates in 2011/2012 which would have been a stupid time to raise rates in a week economy, they clearly didn’t listen to him then. Fledstein being an inflation hawk is always keen to raise rates. I dont think anyone is listening to him now either, however the Fed is well disposed to increasing rates.

Rate raises are decided by a committee of the Governors of regional Fed offices, based on the data and some steering by Powell. Some vote for rate raising and some dont. The data and the views of the Governors (, at present, suggest further rises will occur in 2019. Maybe if you want to view the likely trajectory of rates, you can do a lot better than Feldstein.


He was not happy with QE in 2012 but I don’t recall him asking for interest rate increases then. He is an inflation hawk if you mean he wants to pre-empt future inflation.

The discount rate is set by the Fed’s Board of Governors, not the Governors of the regional Federal Reserve Banks (some of them serve on the FOMC)

They listen to Feldstein, among other heavyweight economists, but Powell’s comment yesterday created an impression in the markets that the Fed is close to finishing its interest rate rises. The reaction of the markets to his ambiguous comments shows how much the markets now depend on loose money. … ments.html



Big week ahead for Europe - the Commons will block the Withdrawal Agreement (they may not even bother to call a vote on Tuesday) and Christmas chaos will ensue on Friday when the European Council refuses May a better deal. EU leaders will be happier to stretch her on the rack (pour encourager les autres) than to tackle the issues that divide them like migration, Italy’s finances, Digital taxation, Trump/China, Russia/Ukraine, etc. .

In the excitement, the ECB will quietly end QE on Thursday but it will keep ZIRP for another year at least. Even so, governments have to be concerned about their refinancing costs next year when their best customer has walked away. QE has been great for our NTMA. Debt servicing costs for 2018 are under €6 billion, that’s €4 billion less than the NTMA had been predicting for 2018 before QE kicked in. But Brexit risks are already weighing on us. The NTMA was very reticent about the yields on the 750 Million of 5- and 10-years bonds it sold last month and we have to refinance about €14.6 billion of maturing bonds next year. … SL8N1YB0Q1 … -1.3705702

Let’s hope the Corporate Tax windfall keeps flowing. 8DD


This is largely covered in the National Debt thread but let me restate.

  1. Most of 2019 is already refinanced, if not all, not least because the NTMA has ended 2019 with more cash at hand than planned even in June of 2018. The issuance in the next 15 months is to cover a large maturing rump in 2020. 2021 is almost clear, there is almost no debt to repay that year, and ‘heavy’ issuance terminates in March 2020 and will not resume until well into 2021 but at a notably lower level than recent years (barring a cyclical recession).

  2. Debt servicing costs will fall to €5bn in 2021, they will bottom out there but do remember that we paid €2.9bn per annum to service *a much much smaller debt *around 20-25 years back and that servicing as a % of government income is insignificant compared to the late 1980s for example. Next years debt servicing will be nearish €6bn and in 2020 we are looking at € 5.5bn ish.

  3. At the end of primary ZIRP/QE this month the ECB will have sloshed €2tr into Sovereigns and €0.5tr was sloshed into Corporates. They are not reducing this pile in 2019 or 2020 but will tactically reallocate maturing portions of the overall €2.5tr into whatever they consider necessary. Targeting a limited set of bonds can work wonders by virtue of coupling, EG Irish sovereigns are coupled with the bund, not with new lirazone issues. I don’t think the overall pool of €2.5tr will shrink until after we have had one of them there recessions first and it will take many years to unwind (reduce) even part of it.

When formal ZIRP ends (dunno really but not for a year) the big risk is that some corporate bonds rise faster than sovereigns do and that the spread widens there. This would be most unfortunate in a recession.

As for sovereigns the Gilets mallarkey in France means that Macron no longer has a mandate to get their national debt under control and that was what the entire Macron project was about. If France waddles past the 100% mark we are in deep shite all over Europe IMO. :frowning:

We can do almost nothing about Brexit, the Brits are politically fragmenting like they did over Irish Home Rule at the turn of the last century and that is an internal matter with external consequences to be honest. :frowning:

  1. The NTMA are quiet because their biggest annual issuance is a syndicated jobbie in January and they will want to offload at least €5bn and perhaps even up to €7bn of (likely) 8 and 10 year paper and at a benchmark rate in only 3 weeks time. I believe it will go rather well myself, enough said for now cos we will know soon. :smiley:


@2pack I have read your updates regularly on this thread and I know next to nothing about the finer details of this kind of money but the impression is that we have been both lucky and had competent management of the debt, is that fair?

What bothers me is bits like ‘our debt servicing for next year will be €5b’ like it’s chump change - even when explained as percentage burden historically. €5b p.a. is enough to build a tunnel to France or build rapid rail projects between every city and resurface any road anyone wants resurfaced. If the property bubble and the proceeding decade of debt accumulation didn’t happen we might actually be a very wealthy country. Of course money doesn’t fix everything, pouring that €5b p.a. into the health service might fix nothing.


€5bn would not build a tunnel to France and would probably be only just about enough for high-speed rail from Cork to Belfast via Dublin. Not that we need one of those.

Think of it this way. National debt is €200bn. The value of all public capital stock (roads, schools, hospitals, etc) is about €100bn.

Debt interest is the cost of paying for a load of infrastructure that other people gave the state money to pay for in the first place.

And also for a load of day-to-day spending already incurred.


We were only lucky in that Draghi finally appeared instead of that cunt Trichet and we did as he said we should, quietly.

We have laboured under high debt…or high debt servicing…for almost 40 years and that amount is not hugely significant …by our standards that is…and looking back around 40 years. In the mid 1980s I knew someone in revenue who got a weekly target on a monday just to keep the lights on and the debt burden on the state from 1983 to 1996 or so was vastly greater than the pile we additionally accumulated from 2008-2013 and are servicing for the next 30 years.

It will take many years to get the annual bill down to €4bn, lets put it that way. And in every single one of those years we have to decide whether there are better uses for the money we would have to pay off the debt.

As we would have to reduce the debt pile by c.€40bn in order to get the annual servicing costs down to €4bn we are looking at a few Metro Norths we won’t build, a couple of bypasses of Cork and some high tech general hospitals to replace the current crapheaps…all as we are dealing with the housing emergency too.


However in the 1980s a lot of Ireland’s national debt was held by Irish people.

This meant that a lot of debt interest was recycled back into the domestic economy. Domestic debt-holders were also happier to take lower yields and were less fickle (wouldn’t sell when things turned bad).

Ireland’s debt is now pretty much held by foreigners, with the exception of a post office savings. This means much of the interest flows abroad, and when the next crisis comes these guys won’t be terribly loyal.


They took a ‘patriotic’ 10-12% interest on those bonds and the main reason furriners ignored Ireland in the 1980s was because we very nearly became another Argentina after the original Argentina fucked the same furriners over in the infamous Latin American debt crisis. :slight_smile:

Even T Bills were paying 5% in the late 1980s after inflation had collapsed to 1% post the 1986 oil shock. Our patriotic types lapped them up and all.


I missed that bonanza, managing only a 4% rate on my Communion money back in the day :smiley: :smiley: :smiley: