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Exclusive: ECB’s Kazāks: Rates Need to Keep Rising After March, But Too Soon to Say How Fast or How Much

Exclusive: ECB’s Kazāks: Rates Need to Keep Rising After March, But Too Soon to Say How Fast or How Much

- 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’

9 February 2023
CEEMEA Exclusive: Poland DMO Head: Yen Bonds Likely, See Lack of Demand for Linkers

CEEMEA Exclusive: Poland DMO Head: Yen Bonds Likely, See Lack of Demand for Linkers

- 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

17 January 2023
Exclusive: Slovenia DMO Head: Pre-Funded About a Third of 2023 Funding Needs

Exclusive: Slovenia DMO Head: Pre-Funded About a Third of 2023 Funding Needs

- 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

12 January 2023
Exclusive: ECB Insider: QT Decision ‘Easier’, Less Controversial than Rate Hike

Exclusive: ECB Insider: QT Decision ‘Easier’, Less Controversial than Rate Hike

- 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’

20 December 2022
Exclusive: ECB Insider: Plan Now Is to Hike at Least Three Times in a Row by 50bp

Exclusive: ECB Insider: Plan Now Is to Hike at Least Three Times in a Row by 50bp

- 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

16 December 2022
Exclusive: ECB’s Centeno: ‘We Are Probably Close to Neutral Levels … 75BP Is Not a Norm’

Exclusive: ECB’s Centeno: ‘We Are Probably Close to Neutral Levels … 75BP Is Not a Norm’

- 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

30 November 2022
Exclusive: ECB Insider: See No Realistic Scenario Where We Reduce Balance Sheet by Much Next Year

Exclusive: ECB Insider: See No Realistic Scenario Where We Reduce Balance Sheet by Much Next Year

- 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

25 November 2022
Exclusive: ECB Insider: ‘I’m Almost Sure’ That December Hike Will Be 50BP

Exclusive: ECB Insider: ‘I’m Almost Sure’ That December Hike Will Be 50BP

- 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

24 November 2022
Exclusive: ECB’s Holzmann: If Things Stay Unchanged Between Now and Dec 15, I Would Go for 75BP

Exclusive: ECB’s Holzmann: If Things Stay Unchanged Between Now and Dec 15, I Would Go for 75BP

- 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

21 November 2022
Exclusive: ECB’s Kazāks: ‘There is no pivot. We still say that inflation is a problem, and we will keep raising rates’

Exclusive: ECB’s Kazāks: ‘There is no pivot. We still say that inflation is a problem, and we will keep raising rates’

- 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’

7 November 2022
Exclusive: ECB Insider: What Everyone Agrees Is That We Need to Take Action

Exclusive: ECB Insider: What Everyone Agrees Is That We Need to Take Action

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

20 September 2022
ECB Insider: New 2024 HICP Projection Won’t Move Much; 2023 GDP and HICP to See Big Changes

ECB Insider: New 2024 HICP Projection Won’t Move Much; 2023 GDP and HICP to See Big Changes

By David Barwick – FRANKFURT (Econostream) – The next set of European Central Bank staff macroeconomic projections for the euro area, due to be unveiled on Thursday, will see medium-term inflation little changed, while forecasts for 2023 will include substantial revisions to both inflation (upwards) and growth (downwards), an ECB insider told Econostream.

1 September 2022