ecb meeting september 2020

ECB Press Releases, IMFBlog writes Chart of the WeekWhen Inequality is High, Pandemics Can Fuel Social Unrest, Amol Agrawal writes European banking’s moment of merger truth, Amol Agrawal writes The American Empire Across the Globe, Amol Agrawal writes Regional market integration and the emergence of a Scottish national grain market. Since 1 January 1999 the European Central Bank (ECB) has been responsible for conducting monetary policy for the euro area - the world’s largest economy after the United States. In this context, the crucial role of government guarantee schemes in underpinning bank loan provision to the real economy was stressed, as was the need to avoid “cliff effects”. This included tracking the underlying dynamics of the pandemic, developments in negotiations on the post-transition Brexit arrangements and decisions on fiscal plans. Close monitoring of inflation expectations remained warranted, since there was a clear risk that the negative shock to the path of inflation as a result of the pandemic could give rise to a renewed downward trend in inflation expectations. This assessment was also broadly reflected in the September 2020 ECB staff macroeconomic projections for the euro area. To do this, we use the anonymous data provided by cookies. On the interaction of gold and foreign exchange reserve returns, Capital treatment of securitisations of non-performing loans, Stablecoins: potential, risks and regulation, Housing booms, reallocation and productivity, Implications of Covid-19 for official statistics: a central banking perspective, Judy Shelton at the Bank of Canada? "ECB sees 2022 inflation at 1.3% (vs 1.3% seen in June)." Furthermore, declining real rates were also likely to have accelerated the depreciation of the US dollar. Mr Dombrovskis, Commission Executive Vice-President**, Ms Senkovic, Secretary, Director General Secretariat, Mr Smets, Secretary for monetary policy, Director General Economics, Mr Winkler, Deputy Secretary for monetary policy, Senior Adviser, DG Economics, Ms Rahmouni-Rousseau, Director General Market Operations, Mr Rostagno, Director General Monetary Policy, Mr Bracke, Deputy Director General Communications, Mr Sousa, Deputy Director General Economics. The Governing Council would conduct net asset purchases under the PEPP until at least the end of June 2021 and, in any case, until it judged that the coronavirus crisis phase was over. This pointed to the possibility of volatility or corrections in stock markets in the period ahead, as seen in US stock markets in the days preceding the September Governing Council meeting. Reference was also made to the large stock of accumulated household savings, which could be drawn down more quickly than foreseen in the staff projections and underpin a rebound in consumption growth in the coming years. Weakened bank balance sheets associated with rising firm indebtedness and defaults could, in turn, lead banks to charge higher lending rates to their customers and to cut back on new loans even though bank lending rates were currently still at historically low levels. While banks had increased their provisions in view of higher expected losses, the point was made that low bank valuations could reflect a weak profitability outlook as well as doubts among investors about the quality of bank balance sheets and the adequacy of the level of provisions given expected increases in firm defaults and bankruptcies. ECB President Christine Lagarde will explain the Governing Council's monetary policy decisions and answer questions from journalists at the Governing Council press conference being held on 10 September 2020 at 14:30 CEST in Frankfurt am Main. While it was noted that the nominal effective exchange rate of the euro was above the level recorded in 2018, it was suggested that it was the pace of the euro’s appreciation, rather than the level of the exchange rate, that could become a concern. In the light of normalising market conditions and subsiding risks of fragmentation, it was highlighted that the role of the PEPP in easing the monetary policy stance had taken centre stage. Release of the next monetary policy account foreseen on Thursday, 26 November 2020. Moreover, momentum in the services sector had slowed somewhat recently. The lack of policy action is much more to do with the reduced effectivenessof the remaining options at its disposal rather than the ECB being comfortablewith the currentstate of the economy. Carsten Brzeski. The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility would remain unchanged at 0.00%, 0.25% and −0.50% respectively. In addition, risk sentiment had improved. An upside risk to growth and to the labour market was seen as emanating from fiscal policy, as several governments had decided on, or were currently discussing, additional measures that were not incorporated in the current projections. While the PEPP was currently seen as the primary instrument for providing additional monetary policy accommodation, it was noted that further cuts in policy rates and changes to the conditions of the TLTROs were also part of the toolkit for providing additional monetary policy accommodation, if necessary. The point was made that the full effects of the pandemic had yet to become evident in corporate balance sheets. In the near term the earlier collapse in oil prices and the temporary reduction in the VAT rate in Germany implied negative rates of euro area headline inflation for the rest of 2020. Introductory statement to the press conference of 10 September 2020, Meeting of the ECB’s Governing Council, 9-10 September 2020. In the near term the earlier collapse in oil prices and the temporary reduction in the VAT rate in Germany implied negative rates of euro area headline inflation for the rest of 2020. Even after the developments of the past few days, the Standard & Poor’s 500 stock market index was still up by around 50% from its mid-March 2020 trough and remained above pre-crisis levels. Bank lending conditions remained very favourable, with lending rates continuing to stand at historical lows. Further support likely from ECB at December meeting . It was suggested that the relative impact of negative shocks to demand and supply could be investigated in more depth by analysing sectoral developments. In this environment, inflation pressures were expected to remain subdued on account of weak demand, lower wage pressures and the recent appreciation of the euro exchange rate. ... As it is also too early for a PEPP extension, the EUR should sail through the September ECB meeting. The slump in activity in the second quarter had actually been somewhat less pronounced than feared and real GDP growth in the third quarter was likely to turn out higher than expected. Look at press releases, speeches and interviews and filter them by date, speaker or activity. However, the recovery was asymmetric, being further advanced in the manufacturing sector than in the services sector. The Governing Council intended to continue reinvesting, in full, the principal payments from maturing securities purchased under the APP for an extended period of time past the date when it started raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. With regard to price developments, there was broad agreement with the assessment presented by Mr Lane in his introduction. It was underlined that uncertainty surrounding inflation was exceptionally high at present. Most of the adjustment in the labour market had stemmed from a decline in average hours worked, which mainly reflected the impact of job retention schemes. To do this, we use the anonymous data provided by cookies. A second driver was likely related to monetary policies implemented in the United States and the euro area, in part reflecting differences in conventional policy space before the pandemic. Petr Krpata, CFA. However, the scale of the upward revision to core inflation was muted by the appreciation of the euro. Your email address will not be published. The ECB’s digital euro: anonymous or not? "ECB sees 2022 GDP growth at 4.2% vs 3.2% seen in September." The GDP-weighted government bond curve had shifted further down and had returned to its pre-crisis level. One factor that might explain the general resilience of financial markets was the growing divergence between the number of COVID-19 fatalities, which remained stable at low levels, and the number of new infections, which had more than tripled since the beginning of August 2020. Survey data indicated that the perceived lack of demand was increasingly becoming a drag on investment – in particular business investment – in the second and third quarters of 2020. Uncertainty related to the evolution of the pandemic would likely dampen the strength of the recovery in the labour market and in consumption and investment, but the euro area economy should be supported by favourable financing conditions, an expansionary fiscal stance and a strengthening in global activity and demand. Market-based indicators of longer-term inflation expectations had returned to their pre-pandemic levels, but the increase had been much smaller than in the United States and they still remained at very subdued levels. At the same time, it was emphasised that the September projections were broadly in line with the June projections only as a result of the policy measures that had been taken and without these measures the outlook for growth and inflation would have been much worse. It was urged that fiscal support should not be withdrawn prematurely, but should be channelled towards enhancing productivity growth, fostering sustainable economic growth, bolstering innovation and strengthening the long-term growth potential of the euro area economy. There were key downside risks to the medium-term outlook for price stability, mainly related to the as yet uncertain economic and financial implications of the pandemic. The annual growth rate of loans to households, which had stood at 3.0% in July, had remained stable since April 2020. The argument was made that ultimately the impact of a one-off adjustment of the exchange rate would be seen in the level of prices rather than in the rate of inflation. "ECB sees 2020 inflation at 0.3% (vs 0.3% seen in June)." 8 September 2020 Read in 5 minutes EUR & ECB Cribsheet for September meeting . Reference was also made to the risk of debt deflation in the period ahead, given the increase in private and public sector indebtedness, and concern was expressed about possible “cliff effects” as fiscal and supervisory measures came to an end, with the risk of financial amplification associated with increasing insolvencies and higher non-performing loans, notably in the non-financial corporate sector. High-yield bond spreads had even fallen by nearly 50 basis points. It was important to stand ready to adjust all of the instruments, as appropriate, to ensure that inflation moved towards its aim in a sustained manner, in line with the commitment to symmetry. Ms Schnabel reviewed the financial market developments since the Governing Council’s previous monetary policy meeting on 15-16 July 2020. Members stressed that the degree of uncertainty remained exceptionally high. Prior to that is the policy announcement due at 1145 GMT. In the context of the announcement by the US Federal Reserve System of a revised Statement on Longer-Run Goals and Monetary Policy Strategy, it was important to highlight that the ECB’s strategy review had been delayed because of the COVID-19 pandemic and that it would resume shortly and would be an important focus of the Governing Council’s work over the next year. In this regard, the underlying dynamics of the pandemic, developments in negotiations on the post-transition Brexit arrangement, the outcome of the US presidential election and decisions on fiscal plans at the individual country level as well as at the euro area level had to be closely monitored. The Governing Council continued to expect monthly net asset purchases under the APP to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it started raising the key ECB interest rates. It was noted that while the baseline scenario assumed that the virus was largely under control, there was considerable uncertainty surrounding the future evolution of the pandemic and the development of a vaccine. While financial market conditions had continued to normalise since the July monetary policy meeting, with valuations of risky assets across the globe continuing to recover, the easing trend in financial conditions had been partly counteracted by the appreciation of the euro. However, it was notable that services inflation – which was much more closely linked to domestic developments and had a high wage content – had also declined further, falling from 1.2% in June to 0.9% in July and 0.7% in August. Mr Lane reviewed the global environment and recent economic and monetary developments in the euro area. The unchanged projection for inflation in 2022 masked an upward revision to inflation excluding energy and food – in part reflecting the positive impact of the monetary and fiscal policy measures – which was largely offset by the revised path of energy prices. With regard to the monetary analysis, members broadly agreed with the assessment provided by Mr Lane in his introduction. While the pandemic was a common shock across euro area countries, references were made to the heterogeneity of developments in activity across countries, which could be attributed to differences in the evolution of the virus, to the containment measures and fiscal policy responses implemented in each country, and to the structure of each economy. At the same time, market-based indicators of inflation expectations had continued to recover, with the five-year forward inflation-linked swap rate five years ahead presently standing at 1.19%. At the same time, there was no room for complacency. The argument was made that the inflation outlook in the September staff projections appeared too optimistic. High economic uncertainty was seen to weigh on consumption, with the level of precautionary savings in particular being dependent on developments in household confidence. It was argued that the severe scenario could not be entirely ruled out as there had been a new wave of infections, even if it had not so far been as lethal as the first wave. Against that background, members agreed with the proposal by Mr Lane to leave the overall monetary policy stance unchanged and to reconfirm the current configuration of existing monetary policy instruments. Members widely agreed with the assessment presented by Mr Lane that ample stimulus remained necessary to support the economic recovery and to safeguard medium-term price stability. Generally, it was felt that more time was needed to better understand the possible impact, including the timing, of fiscal stimulus at the domestic and European levels. Inflation was expected to remain persistently low over the medium term, notwithstanding a gradual pick-up over the projection horizon. In discussing recent developments in inflation expectations, members noted that longer-term inflation expectations, as reported in the ECB’s Survey of Professional Forecasters, had fallen to 1.6%, the lowest level since the start of Economic and Monetary Union. The unchanged projection for inflation in 2022 masked an upward revision to core inflation (reflecting the positive impact of monetary and fiscal policy measures). The June Eurosystem staff projections had been produced near the trough of the crisis. In particular, investors and forecasters had become more optimistic about the prospects for the early availability of a vaccine. In this context, it was remarked that bank stock prices had been continuously declining, with low bank valuations being evident in very low price-to-book ratios. The unchanged projection for inflation in 2022 masked an upward revision to core inflation (reflecting the positive impact of monetary and fiscal policy measures). In discussing recent developments in inflation expectations, members noted that longer-term inflation expectations, as reported in the ECB’s Survey of Professional Forecasters, had fallen to 1.6%, the lowest level since the start of Economic and Monetary Union. The response was so strong that the GeForce RTX 3080 was immediately sold out following its launch in September.Nvidia shares have already risen by a staggering 120% so far in 2020… "ECB sees 2021 GDP growth at 3.9% vs 5% seen in September." As a European-based forex trader or investor, you must have heard about the famous European Central Bank meeting. The GDP-weighted government bond curve had shifted further down and had returned to its pre-crisis level. Given the openness of the euro area economy, members considered that a further appreciation of the exchange rate constituted a risk to both growth and inflation. In September, the ECB estimated a contraction of 8% in euro zone GDP this year, followed by a rebound of 5% in 2021. It was argued that the severe scenario could not be entirely ruled out as there had been a new wave of infections, even if it had not so far been as lethal as the first wave. High rates of corporate loan growth continued to mirror elevated liquidity needs of firms to finance their ongoing expenditures, such as wage payments and working capital, and to further build liquidity buffers. Over the summer real interest rates had declined notably faster in the United States than in the euro area. In this context, the crucial role of government guarantee schemes in underpinning bank loan provision to the real economy was stressed, as was the need to avoid “cliff effects”. With regard to the two objectives of the PEPP, it was underlined that the PEPP had been successful in stabilising financial market conditions in the euro area. The European Central Bank (ECB) made no changes to its key monetary policy instruments at today’s meeting. Looking at inflation developments in recent months in more detail, energy inflation had continued to be a drag on euro area inflation, as oil prices were still at low levels, implying very negative year-on-year rates of energy inflation. Press conference following the Governing Council meeting of the ECB in the Netherlands 23/06/2021 Governing Council of the ECB: non-monetary policy meeting in Frankfurt The euro has looked strong recently and … Looking at inflation developments in recent months in more detail, energy inflation had continued to be a drag on euro area inflation, as oil prices were still at low levels, implying very negative year-on-year rates of energy inflation. "ECB sees 2021 inflation at 1% (vs 0.8% seen in June)." At the same time, the level of activity remained well below the levels prevailing before the pandemic. While the appreciation to some extent reflected improvements in global risk sentiment, as well as euro area factors such as the NGEU recovery plan, it also reflected developments in monetary conditions in the euro area relative to the rest of the world. In nature factors had distorted the August figure, underlying price pressures were expected to remain on the Union! 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