Category Archives: European Central Bank

European markets soar as Germany moves to lift ‘debt brake’ and raise defence spending

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Berlin’s ‘big bazooka’ proposal sends industrial stocks surging but fiscal sea change also hikes borrowing costs

European financial markets have rallied sharply and German borrowing costs have soared after the country’s prospective leaders announced a historic deal to loosen its “debt brake” rule to boost spending on defence.

The yield – in effect the interest rate – on 30-year German government bonds rose by about 25 basis points to 3.08% in its biggest daily increase since October 1998.

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Beethoven and Marie Curie compete with birds to appear on new euro notes

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European Central Bank picks two themes for redesign submissions: ‘iconic personalities’ or rivers and birds

He was a master of notes, and now the German composer Ludwig van Beethoven could be one of the faces of the redesigned euro, the first time the EU currency’s banknotes have been revamped.

In a process that started in 2021 and has already involved a public inquiry and two multidisciplinary advisory groups, the European Central Bank (ECB) has selected two themes for the redesign.

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European Central Bank cuts interest rates to support growth as eurozone economy stagnates – as it happened

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Live coverage of business, economics and financial news as ECB cuts main interest rate by 0.25 percentage points in effort to support European economies

It was a flash reading on the Eurozone economy, so we don’t have the details on what the drivers were. But it’s clear that it was a weak end to 2024.

But the European Central Bank might be able to spur a bit of economic growth in the eurozone with looser monetary policy.

This marks a weak end to last year, following positive growth in the first three quarters of 2024. As a result, first estimates suggest that the currency bloc as a whole grew by 0.7% in 2024. Declining activity in Germany – the Eurozone’s largest economy – has weighed on the bloc’s growth, with German GDP contracting by 0.2% on the quarter. This suggests Germany has now seen annual declines in activity for two consecutive years.

In 2025, further loosening of monetary conditions is expected to provide a modest uptick in activity for both Germany and the Eurozone, with growth expected to amount to 0.3% and 1.0% respectively.

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ECB faces tough task after flip in fortunes for eurozone economies

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Economists say EU countries hardest hit by 2010s debt crisis now in stronger position than France and Germany

The European Central Bank is facing a tough balancing act in 2025 as it tries to navigate a reversal of fortunes in eurozone economies, as the hardest-hit nations of the 2010s debt crisis outperform the traditional core.

Highlighting a potential shift in power dynamics within the single currency bloc, economists said countries in the EU periphery ravaged by last decade’s sovereign debt crisis were in a stronger position than northern Europe’s most powerful nations, including France and Germany.

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Shrinking GDP forecast adds to German woes after coalition collapse

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European Commission figures predict German economy, usually the engine of the EU, will contract O.1% this year

Germany’s looming general election will be fought against the backdrop of a stagnating economy, the European Commission has forecast, with GDP expected to have contracted in 2024.

The commission’s quarterly forecast suggested Germany, traditionally the engine of the bloc’s economy, will be its weakest performer in 2025, notching up growth of just 0.7% after shrinking by 0.1% this year.

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ECB cuts interest rates to support flagging eurozone economy

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Fall in inflation enables central bank to bring in quarter point cut to 3.25% after business and consumer slowdown

The European Central Bank has intervened to prevent a sharp slowdown in the eurozone economy with its first back-to-back interest rate cut since the euro crisis in 2011.

With Germany on the brink of a recession and inflation tumbling across the 20 member single currency bloc, the ECB followed a reduction in the cost of borrowing at its previous meeting in September with a further 0.25 percentage point cut in its key deposit rate to 3.25%.

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French stock market swings to gain after election surprise; Britvic agrees to improved Carlsberg offer – business live

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Live coverage of business, economics and markets after New Popular Front is largest party in second round of France’s election, with far-right third

The French election has meant that Marine Le Pen’s far-right National Rally (RN) will not be in power, but it has not settled what France’s new government will look like.

The New Popular Front (NFP), the hastily arranged coalition of left-wing parties, won the most seats, but it is far short of a parliamentary majority. The result will mean a lot of negotiation to agree on who will be the new prime minister – let alone on achieving anything meaningful in governing the country.

The French parliament is more divided than ever, made up mainly of three blocs (Left – 182 seats, Centre – 168 seats, Extreme Right – 143 seats) and a number of smaller ones. As we predicted before the elections, no bloc can claim an absolute majority.

Minority government

French political parties “are not used to making concessions in order to create a programme around a coalition with other parties”, and the NFP’s most prominent figure, Jean-Luc Mélenchon demanded its entire programme be implemented. “If political parties maintain such positions, a long period of instability will ensue,” said Ledent.

Learning to cooperate

“Excluding the 80 MPs from the far left and the 145 from the far right, there are over 350 MPs left to form a broad coalition ready to reform France, taking into account the diversity of opinions. In other European countries, including Germany, such a configuration would be quite natural and would result in a government with a clear majority.

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Eurozone business activity grows as expected ECB interest rate cut looms

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A 25 percentage point cut to main lending rate is forecast amid growth in Germany, Italy and Spain

Business activity grew across the eurozone at the fastest rate in a year in May while inflation cooled, according to data that will be welcomed by the European Central Bank (ECB) in advance of expected interest rate cuts tomorrow.

The latest HCOB purchasing managers’ index (PMI) data, compiled by S&P Global, showed private sector output expanded in most economies covered by the euro currency after growth in Germany, Italy and Spain was only marginally offset by a downturn in France.

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European and Canadian central banks expected to cut interest rates this week

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New lower rates of 3.75% and 4.75% respectively are likely to be introduced this week after drops in inflation

Borrowers in the eurozone and in Canada are expected to get some relief from high interest rates this week.

After recent drops in inflation, the European Central Bank (ECB) and the Bank of Canada (BoC) are forecast to lower their benchmark rates in the coming days.

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Dow Jones Industrial Average hits 40,000 points for first time; UK reality TV stars charged over FX scheme – as it happened

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Strong quarterly results and hope of interest rate cuts drive DJIA to new alltime high

A group of business leaders have warned Rishi Sunak that the government’s migration policies risk weakening the UK university sector, the Financial Times reports, undermining a key reason for companies to invest in the country.

The FT explains:

In a letter to Rishi Sunak, bosses at groups including miners Anglo American and Rio Tinto and industrial conglomerate Siemens, said they were “deeply concerned” by widening funding gaps and declining international student applications that were “a result of government policy”.

They said this risked “undermining the positive impact that international students have on our skills base, future workforce, and international influence”, as well as reducing the funding available for research and industry collaboration.

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MP calls Royal Mail delivery cuts a ‘slap in the face for families’ – as it happened

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Live, rolling coverage of business, economics and financial markets as UK postal service says it wants to cut 1,000 jobs and cut delivery days

The question on economists’ lips after the surprise easing of eurozone inflation is: will the European Central Bank (ECB) cut interest rates as early as this month?

The ECB’s rate-setting governing council, led by president Christine Lagarde, meets next week. Economists expect the council to cut rates in June, but surprising data and some doveish comments from some members of the council appear to have put an April cut into play.

While at first sight this looks like it opens up a possible rate cut in April, the ECB is unlikely to act this month. More data on wage growth will come in May, and the ECB needs to be certain of its path. In President Lagarde’s own words: “we will know a little more in April, but we will know a lot more in June”.

Christine Lagarde’s previous indication that the ECB may not commit outright to a path of rate cuts suggests a cautious approach, but the consensus among economists leans towards a potential cut as early as June, pending further data on wage growth trends.

The challenge here for the ECB is that reaching the last mile target inflation rate of 2% may prove more arduous than anticipated, with incremental decreases seen as most likely.

Will the labour market tighten further now that GDP growth looks to be rebounding? We doubt it and, in fact, suspect the unemployment rate will edge up over the coming months.

A still-low unemployment rate doesn’t necessarily mean wage growth will remain at today’s highs, so it need not worry the ECB nor prevent it from starting its easing cycle. We think wage growth will come down, in line with the fall in inflation in recent months as workers’ negotiating power diminishes. A recovery in productivity would support wage growth even as inflation eases. We think productivity growth is now improving, but slowly does it.

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Eurozone inflation rises to 2.9% after increase in energy costs

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December data comes amid speculation over when European Central Bank will cut interest rates

Inflation across the eurozone rose in December after an increase in energy costs, reversing six months of consecutive falls and easing the pressure on the European Central Bank (ECB) to cut interest rates.

Figures from the EU statistical agency Eurostat showed consumer prices across the 20-country bloc rose at an annual rate of 2.9% last month, up from 2.4% in November. Economists polled by Reuters had forecast a slightly higher reading of 3% for December.

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Bank of England, Fed and ECB poised to leave interest rates on hold

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Stubbornly high inflation forces central banks to avoid cuts, but markets expect falls next year

The western world’s largest central banks are poised to keep interest rates on hold this week amid concerns over stubbornly high inflation, despite growing expectations for sharp cuts in borrowing costs next year.

In a crunch week for the global economy, the US Federal Reserve, Bank of England (BoE) and European Central Bank are expected to keep interest rates at their current restrictively high levels to ensure inflation continues to fall back from the highest levels in decades.

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Eurozone banks starting to show ‘stress’ as loan defaults rise, ECB warns

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Rising interest rates have boosted profitability but are likely to limit demand and increase risk of bad debts, says central bank

The balance sheets of eurozone banks are showing “early signs of stress” after a rise in loan defaults and late payments by customers, the European Central Bank has warned.

Higher interest rates have boosted banks’ income and profits for the time being, the ECB said, but lenders are facing pressures from higher funding costs, worsening asset quality and lower lending volumes.

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ECB warns eurozone economy ‘remains weak’ after leaving interest rates on hold; US growth accelerates to 4.9% – as it happened

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Eurozone central bank gives press conference after pausing its cycle of rate hikes, as inflation slows and Europe’s economy weakens

Back in the City, shares in Standard Chartered bank have tumbled over 11% after it missed profit expectations and took a hit on its exposure to China.

Standard Chartered, the Asia Pacific-focused bank, reported that pretax profits more than halved in the last quarter to $633m, down from $1.391bn in Q3 2022.

We have continued to make strong progress in the third quarter against the five strategic actions outlined last year, delivering a solid set of results.

Wealth Management has continued its recovery with double digit income growth and the Financial Markets performance has been resilient against a strong comparator period.

Real GDP per capita is now almost 10% above its pre-pandemic level – a much stronger performance than the euro area as a whole. The unemployment rate has also declined steeply, and was 10.9% in August, the lowest level since the end of 2009.

And with a stronger economy, the country has been able to work further through its debt challenge. Greece’s public debt-to-GDP ratio has dropped 35 percentage points from its peak of 206% in 2020, one of the fastest falls in the world.

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Sluggish eurozone economies will not welcome ECB’s interest rate rise

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Weak consumer spending as, people – especially in Germany, the EU’s largest economy – put more into savings

Interest rates went up again across the eurozone on Thursday – probably for the last time during this cycle of hikes that has become a familiar story in the single currency bloc, as it has in the UK and US.

The European Central Bank (ECB) raised its main deposit rate by a quarter of one per cent to 4% – the highest level in the euro’s history.

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Eurozone sinks into recession as cost of living crisis takes toll

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GDP shrank 0.1% in first quarter of 2023 and final three months of 2022 after revisions to earlier estimates

The eurozone slipped into recession in the first three months of the year, after official figures were revised to show the bloc’s economy shrank as the rising cost of living weighed on consumer spending.

Figures from Eurostat, the EU’s statistical agency, showed gross domestic product (GDP) fell by 0.1% in the first quarter of 2023 and the final three months of 2022 after revisions to earlier estimates. A technical recession is generally defined as two consecutive quarters of negative growth.

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European Central Bank chief suggests firms are engaging in ‘greedflation’

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Comments by Christine Lagarde come after central bank raises interest rates for seventh time in succession

The president of the European Central Bank suggested companies were taking advantage of high inflation when raising prices, after the bank raised interest rates by a quarter of a percentage point to tackle the cost of living surge.

Christine Lagarde said wage pressures in the eurozone had strengthened, as workers try to recoup some of the purchasing power they have lost due to inflation, but hinted some firms were engaging in so-called greedflation.

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Credit Suisse shares continue to fall despite efforts to calm nerves

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Lifelines handed to Swiss bank and US regional bank First Republic fail to ease investor concerns

Credit Suisse shares came under renewed pressure on Friday, despite fresh attempts by central banks and politicians to calm fears about a crisis in the global banking industry sparked by the collapse of two US banks this week.

Shares in Credit Suisse, Switzerland’s second largest bank, fell 8% on Friday despite securing a £45bn emergency loan from the Swiss National Bank just days earlier to shore up its liquidity after a week of panic.

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ECB raises eurozone interest rate despite banking sector fears

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Concerns half-point could set off domino effect across financial industry knocked by Credit Suisse crisis

The European Central Bank has raised interest rates across the eurozone by 0.5 percentage points, despite fears that higher borrowing costs could set off a domino effect across a banking sector already reeling from a collapse in confidence in Switzerland’s second largest lender, Credit Suisse.

Officials at the ECB, the central bank covering the 19-member euro bloc, said inflation was likely to remain high “for too long”, forcing it to continue with its planned run of rate increases.

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