- ECB insider: Reducing pace of hiking post-March to 25bp the correct strategy
- ECB insider: Others will oppose post-March slowdown of tightening pace
- ECB insider: ‘Very little discussion that we are now in restrictive territory’
- ECB insider: Some Council members will see the ECB as no longer very far from the terminal rate
- ECB insider: Core inflation to remain relatively high and away from our target this year
- ECB insider: Some concerns that wage demands could pick up quickly in 1H
- ECB insider: Increasing trend of firms protecting their margins contributing to price pressures
- ECB insider: Hawks ‘not very comforted’ by assurances of lower medium-term price pressures
- ECB insider: Some hawks question medium-term inflation outlook due to 2d-rd effects, energy prices
- ECB insider: Updated forecasts will maintain view of more persistent inflation dynamics
- ECB insider: Don’t expect any material change in core inflation dynamics in 2023
- ECB insider: Not seeing much inflation from the end of China’s zero-Covid policy
- KfW: Cost benefits of issuing US dollar bonds ‘not that obvious anymore’
- KfW: Optimistic that in Q2, ‘we'll find a good window’ to issue US dollar-denominated bonds
- KfW: Aim to reach average maturity of five to six years; don't plan many long-term fundings
- Centeno: When we stop hiking, we’ll be confident we’ve done enough for price stability
- Centeno: Don’t see upside risks to inflation, given December forecast revisions
- Centeno: ‘Inflation is going down faster than what we expected in December’
- Centeno: Somewhat uneasy about how fast ECB policy tightening has occurred
- Centeno: Observed euro area average wage increase can’t be considered 2d-round effect
- Kazāks: ‘Getting to 3% in March is a good choice that … will take us into restrictive territory’
- Kazāks: ‘Rates will need to go up at further meetings’ even after March; 'we are on a solid path of rate increases'
- Kazāks: ‘At some point we’ll reduce our speed’, but ‘by no means’ in March
- Kazāks: Hiking more than 50bp in March ‘would be reckless’, not needed in view of previous steps
- Kazāks: Too early to say how big May rate hike should be
- Kazāks: ‘Quite likely that there’s not going to be a recession at all’
- Kazāks: Once at terminal, expect to ‘stay there for an extended period’; rate cut in 2023 would be 'way too premature'
- Kazāks: ‘Terminal rate is by no means 3%, that has to be clear’, but ‘I also don’t think we will go as high as the US’
- Kazāks: Baseline would be ‘more benign inflation projections in March, but there are risks on both sides’
- Poland DMO head: International markets ‘not critical source of funding’ for Poland
- Poland DMO head: See ‘clear need’ to be present in Japan
- Poland DMO head: Resolution of EU funds dispute would be desirable for debt management
- Poland DMO head: Negative CJEU outcome could be ‘black swan’ for Polish bonds
- ECB insider: Easier to hike interest rates when labour markets are holding up well
12 January 2023
- Slovenia DMO head: 2023 syndications better done sooner rather than later
- Slovenia DMO head: ‘Contemplating a return to the US dollar market’ this year
- Slovenia DMO head: Increase in Slovenian budget deficit shouldn’t make life difficult
- Slovenia DMO head: Unlikely to revisit ultra-long end of yield curve for now
- Slovenia DMO head: Braced for ECB active bond sales
- ECB insider: No insistence on QT sequence with respect to TLTRO repayments or rate hikes
- ECB insider: Average €15 billion a month of QT ‘a very good start’
- ECB insider: ‘Most likely’ that all maturing bonds will be treated equally
- ECB insider: In terms of QT, ‘we have not done anything that markets were not expecting’
- ECB insider: Very clear that we’re going to hike by 50bp in February
- ECB insider: Wouldn’t be surprised if someone questions need for 50bp in March
- ECB insider: Policy will be restrictive as of February rate hike
- ECB insider: Terminal rate has now risen
- ECB insider: December Governing Council decision could have gone either way, 50bp or 75bp
- ECB insider: QT’s impact on monetary policy tightening is ‘minimal’
- ECB insider: QT complements rate hikes, not a substitute for them
- ECB insider: ECB staff probably assumes no need for more big revisions in next projection exercise
- ECB insider: See upside risks to 2025 inflation, especially to core
By David Barwick – FRANKFURT (Econostream) – Following is the full transcript of the Econostream interview dated 29 November 2022 with European Central Bank Governing Council member Mario Centeno:
30 November 2022
- Centeno: If Council ‘sees the need to take policy rates above neutral levels it will do so temporarily’
- Centeno: ‘Very important to underline that any rate hikes above neutral levels are supposed to be temporary’
- Centeno: Rates now closer to normal, but ‘this is no guarantee that further steps are dispensable’
- Centeno: ‘A decision completely aligned with market expectations is not guaranteed’
- Centeno: ‘Adding more predictability and the rationale to our decisions will be key’
- Centeno: ‘Financing conditions are no longer very accommodative’
- Centeno: ‘Our decisions cannot be compared, in size, with those of the Fed, as conditions differ substantially’
- Centeno: Key principles to reduce APP portfolio should exclude any resurgence of fragmentation
- ECB insider on QT: ‘Even if there’s a discussion, we still have fears’
- ECB insider: ‘It can be very fragile on European bond markets’
- ECB insider: ‘We can’t just sell the bonds; it’s impossible’
- ECB insider: Could test APP roll-off at €20bn/month if markets, general economic situation permit
- ECB insider: ‘When you do QT, it is very different than when you do QE’; no symmetry
- ECB insider: Sizeable camp would like to be cautious, not commit ourselves to many things
- ECB insider: Hawks can accept slower hiking if terminal rate unaffected and progress made on QT
- ECB insider: Many Governing Council members fear hiking substantially just before a recession
- ECB insider: October’s 75bp hike was already ‘not so easy’
- ECB insider: ECB President Lagarde likely ‘senses that there is no clear consensus for 75’
- ECB insider: See risk of much more political opposition to hiking as soon as some countries enter recession
- ECB insider: Hawks will feel they must ask for 75bp hike even if they expect outcome to be 50bp
- Holzmann: ‘If things remain unchanged from now to the decision, then I would go for 75’ bp
- Holzmann: If there were a ‘major reduction’ in HICP this month, ‘I could go along with 50’ bp
- Holzmann: No ‘major recession’ seen for now
- Holzmann: On QT, see ‘‘strong consensus that we should start small to test the markets’
- Holzmann: QT should start with APP, only involve PEPP ‘much later’
- Holzmann: Roll-off of assets acquired under the APP can overlap with rate hikes
- Holzmann: ‘Still very much concerned that a de-anchoring of inflation expectations will take place’
- Holzmann: Recent German wage agreement ‘acceptable’, but may lead companies to increase prices
- Kazāks: ‘Discussion about the size of the step is appropriate and of course there will be one’
- Kazāks: December step size depends on economy and on whether we adjust other instruments
- Kazāks: Adjusting other instruments could improve policy transmission to all segments of economy
- Kazāks: ‘There is no need to take a pause at the turn of the year, we should continue hiking into next year’
- Kazāks: Any recession ‘likely to be relatively shallow and short-lived, and this would not lead to rate cuts’
- Kazāks: Situation ‘becoming more nuanced’, so natural that our discussions reflect greater ‘diversity of views’
By David Barwick – FRANKFURT (Econostream) – The European Central Bank is planning a non-monetary policy meeting of the Governing Council in northern Finland in February, Econostream understands.
28 October 2022
Exclusive: ECB Insider: Expect Lane to Propose 75bp Hike at Upcoming Council Meeting
- ECB insider: Need to Adjust Other Instruments; TLTROs Take Precedence over QT
- ECB insider: Recent Developments More in Line with September’s Risk Scenario
Exclusive: ECB Insider: What Everyone Agrees Is That We Need to Take Action
- ECB insider: Could easily picture second-round effects on wages, even if the economy weakens
- ECB insider: We see signs of increased inflation expectations in 2024
- ECB insider: 50bp in September would have undermined our credibility
- ECB insider: All the data show increased inflation all across the board in the coming years