Tag Archives: European Central Bank

Watch commercial banks’ interest rates for clues on the future

While all eyes are on what central banks will do with interest rates, consumers and investors alike should really worry about what commercial banks will do.

Continue reading

Why the ECB is in no hurry to fight inflation

The euro has lost a lot of ground versus other major currencies as the European Central Bank (ECB) is taking a very dovish stance even compared to the usually dovish Bank of England.

As expected, a German has the difficult task of being a lone hawk amid doves: Isabel Schnabel, member of the ECB’s Governing Board, recently warned that the central bank has consistently been wrong in its inflation forecasts.  

Continue reading

Come on, Europe: wir schaffen das

There are moments in politics and policy that change the course of history; when they can be summarised in three words, they are the best.

Mario Draghi’s statement back in 2012 that the European Central Bank will do “whatever it takes” to save the euro was such a moment: from then on, the speculators’ attack on weaker eurozone members’ sovereign debt stopped.

Another such moment came three years later, when in 2015 German chancellor Angela Merkel allowed one million refugees to enter Germany. “Wir schaffen das” (we can manage this), she said.

Continue reading

ECB pays lip service to worries about inflating a housing bubble

The European Central Bank (ECB) raised its inflation target last week, at the same time going to great lengths to try to persuade people that it did not.

In the process, the central bank also stated that it will find a way to deal with an issue that is increasingly pressing: that of runaway house price inflation.

Continue reading

Investors fear inflation but run to it

Recent capital flows highlight a paradox: investors are afraid of inflation, but seem to have increased their allocation to just the assets that would do worst out of it.

Continue reading

Italy tourism season is crucial for post-Covid recovery

The fact that Italy was the first European country to be hit hard by the Covid-19 pandemic seems a distant memory. Will Italy now be the first in the European Union to stage a spectacular recovery?

Continue reading

House prices are becoming red hot, and this is scary

House price growth is accelerating in the UK and the rest of Europe, but it is far from healthy growth. The consequences of lax rules on lending to house buyers could be devastating.

Continue reading

Will digital currencies encourage debt default by stealth?

Central banks are getting closer and closer to issuing digital currencies, but this attempt to fend off the threat of cryptocurrencies raises many questions about the future of the economy.

One consequence of central bank digital currencies, which for the moment is not discussed as much as it should be, is that they could serve as “Trojan horses” for negative interest rates – and these in turn could amount to debt default by stealth.

Continue reading

Debate starts on widening the mandates of central banks

The European Central Bank (ECB) seems to be wading deeper into political territory, opening an interesting debate on what exactly is the role of central banks.

The ECB recently published a guide to the banks under its supervision, explaining how it expects them to consider risks related to climate change and the environment in their business strategies and their risk management.

Continue reading

Stricter liquidity and leverage controls may be coming

If you are wondering what’s behind the sudden largesse of the European Central Bank (ECB) when it comes to purchases of bonds, you may find a recent speech by an ECB official at a conference about financial stability enlightening.

While regulators focused on making banks safer following the 2007-2009 financial crisis, the non-bank financial sector has been allowed to continue without the same stringent requirements for liquidity and leverage. This gap came into sharp focus during the crisis caused by the Covid-19 pandemic.

Continue reading