Category Archives: European Central Bank

Fed raises interest rate by 0.75 percentage points as US seeks to rein in inflation

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Third outsized rate increase in a row as central bank struggles to fight runaway inflation, increasing the cost of everything

The Federal Reserve announced another sharp hike in interest rates on Wednesday as the central bank struggles to rein in runaway inflation.

The Fed raised its benchmark interest rate by 0.75 percentage points, the third such outsized rate increase in a row, bringing the Fed rate to 3%-3.25% and increasing the cost of everything from credit card debt and mortgages to company financing.

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Euro a whisker from dollar parity; Heathrow caps passenger numbers amid travel disruption – as it happened

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Euro slides to a 20-year low of $1.0001 on anxiety that Europe will fall into recession, as Heathrow introduces limit on summer holiday passengers

The euro is teetering ever closer to parity with the dollar.

It’s now trading at just $1.0005, on concerns that the shutdown of the Nord Stream 1 gas pipeline for maintenance could become permanent.

“While we believe that a cessation of Russian gas supply to Europe is a real possibility, one that would cause a Eurozone-wide recession with three consecutive quarters of economic contraction, there are also good reasons to assume that gas supplies will resume after the maintenance.”

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Why is the ECB still fiddling over a potential eurozone crisis? | Nils Pratley

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Christine Lagarde is failing to heed the lesson of last decade’s crisis: act quickly and act clearly

Perhaps the European Central Bank was feeling left out as the financial world turned its attention to the US Federal Reserve’s interest rate hike. But emergency meetings of major central banks are supposed to produce more substance than the weak offering that emerged from Frankfurt after a morning of contemplation: a plan to accelerate work on a “new anti-fragmentation instrument”.

The fragmentation in question is the widening of bond yields between eurozone countries. In short, as interest rate rises have come into view, weaker economies are having to pay meaningfully greater rates to borrow than the likes of Germany – about 2.4 percentage points more in the case of Italy.

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Markets brace for sharpest rise in US interest rates in almost 30 years

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Federal Reserve expected to increase cost of borrowing by 0.75 percentage points to curb rising inflation

The world’s financial markets are bracing themselves for the sharpest rise in US interest rates in almost 30 years, as America’s central bank takes action to halt rising inflation.

After days of frenzied investor speculation and signs of growing central bank anxiety, the Federal Reserve is expected to increase the official cost of borrowing by 0.75 percentage points for the first time since 1994.

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London Stock Exchange suspends trading in 27 firms with strong links to Russia

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Energy and banking giants Gazprom and Sberbank plus EN+, Lukoil and Polyus among firms

The London Stock Exchange has suspended trading in 27 companies with strong links to Russia, including energy and banking giants Gazprom and Sberbank.

The LSE said it was moving to block trading in the companies, which also include EN+, Lukoil and Polyus, with immediate effect “in light of market conditions, and in order to maintain orderly markets”.

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ECB keeps interest rates on hold, warns of ‘transitory’ higher inflation – business live

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The global semiconductor shortage and ongoing disruption to supply chains continue to knock carmakers’ profits.

Volkswagen and Stellantis both suffered financial hits in the third quarter the year, as a result of the global shortage of computer chips, which has prevented the firms from producing as many vehicles as they had originally planned.

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EU takes legal action against Germany after tussle between courts

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Brussels says German court ruling contradicting ECJ sets ‘dangerous precedent’ for integrity of EU law

Brussels has launched a legal case against Germany over an alleged breach of “the principle of the primacy of EU law” by the country’s constitutional court.

The “infringement proceeding” is the result of a ruling last year by the German federal constitutional court in Karlsruhe which it is claimed undermined the pre-eminence of the European court of justice (ECJ).

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Mario Draghi sworn in as prime minister of Italy

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Former European Central Bank chief to lead unity government as it tackles Covid and economic slump

The former European Central Bank chief Mario Draghi has been sworn in as Italy’s prime minister at the head of a unity government called on to confront the coronavirus crisis and economic slump.

Draghi, a respected figure at home and internationally, managed to convince almost all of the country’s main parties to support his government, with leaders from the far-right League and populist Five Star Movement (M5S) adopting more moderate, pro-European tones in recent days.

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Mario Draghi’s new government to be sworn in on Saturday

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Italians optimistic as former ECB chief appoints mix of political and technocratic ministers to cabinet

Italy’s new government, led by former European Central Bank chief Mario Draghi, will be sworn in on Saturday, ending weeks of political turmoil.

Draghi, 73, announced his cabinet, which contains a mix of political and technocratic ministers, to president Sergio Mattarella on Friday.

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Forget doom-laden headlines, the dollar has not gone into terminal decline | Barry Eichengreen

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Too much is being read into the greenback’s recent weakening against the euro

The dollar is in freefall! The global greenback is doomed! screamed recent headlines. Actually, such sensational headlines are “too sensational”, to echo that noted authority on currencies, Miss Prism, in Oscar Wilde’s The Importance of Being Earnest.

The dollar’s fall in July to a two-year low against the euro was the immediate impetus for these stories. In fact, the dollar’s recent slide is one in a series of readily explicable fluctuations. When the Covid-19 pandemic went global in March, the dollar strengthened on the back of safe-haven flows into US Treasuries, as it does at the start of every crisis. By May, the Federal Reserve, acting as global lender of last resort, had accommodated this mad scramble for dollars by pouring buckets of liquidity into financial markets and the greenback gave back its early gains.

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UK car sales slump as 2,000 workers lose their jobs in Covid-19 crisis – business live

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Live coverage as Aston Martin and car dealer Lookers announce costs savings plans

Young’s pub chain intends to open all of its 276 sites by the 3 August, and is hopeful the business can “bounce back” once its pubs are allowed to reopen, but expects trading to be “materially below average” for the rest of the year.

Another interesting detail from the SMMT data: Tesla’s Model 3 was the most popular car during May.

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Franco-German plan for European recovery will face compromises

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Macron-Merkel plan to borrow on behalf of EU to help worst-hit countries is already being challenged by ‘frugal four’

When France and Germany announced a plan to raise €500bn (£448bn) on financial markets to fund a European coronavirus recovery plan, leaders sought to underscore the magnitude of the moment.

The French president, Emmanuel Macron, hailed “a real change of philosophy”, with the plan for the European commission to borrow money on behalf of the entire EU and issue grants to the most stricken industries and regions. Angela Merkel, the German chancellor, declared: “The nation state has no future standing alone,” and the German finance minister, Olaf Scholz, evoked the legacy of the US founding father Alexander Hamilton, who helped to transform the US into a true political unit with his scheme for the national government to take on debts accrued by individual states.

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Merkel intervenes in damaging row between Germany and Brussels

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European commission has warned of possible legal action over constitutional court ruling

Angela Merkel has stepped in to try to find a way out of a damaging clash between Germany and Brussels after the EU threatened to bring infringement proceedings over a ruling by the country’s constitutional court.

The German chancellor stressed that the dispute was solvable, after the European commission president, Ursula von der Leyen, issued an unusual statement on Sunday warning of possible legal action against Berlin.

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Coronavirus has revealed the EU’s fatal flaw: the lack of solidarity | Shahin Vallée

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There has been little political will to pool taxes, borrowing and spending to support states worst hit. But it is the only way out

The European summit last week was hailed as a moment of truth. In a recent interview, France’s president, Emmanuel Macron, laid out how European leaders had a rendezvous with history and needed to come together, and show that Europe under duress was able to respond with a common voice and with common means to the Covid-19 crisis. By all measures, this rendezvous with history was missed. European leaders in effect agreed to keep calm and carry on.

They endorsed a roadmap to exit lockdown after each country had in fact already decided and announced their own uncoordinated exit plans. In some countries, such as Germany, deconfinement measures are not a prerogative of the federal government and coordinating between states is challenging enough, let alone coordinating with other countries.

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EU strikes €500bn relief deal for countries hit hardest by pandemic

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Compromise reached after Netherlands relents on ‘economic surveillance’ of beneficiary nations

A messy compromise to unlock €500bn (£438bn) of EU support for countries hit hardest by the coronavirus pandemic has been struck after Italy’s prime minister, Giuseppe Conte, warned that the existence of the bloc was at stake.

EU finance ministers on a video conference call struck a deal late on Thursday after the Netherlands shifted on a demand for “economic surveillance” of countries benefiting from €240bn of credit lines via the European stability mechanism, a bailout fund for struggling member states.

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ECB U-turn shows it fears coronavirus could destroy eurozone project

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Bank now realises Europe will sustain grievous economic damage from Covid-19

Weak. Clumsy. Behind the curve. The European Central Bank took stick for its initial response to the Covid-19 pandemic – and rightly so.

Those accusations can no longer be levied after the ECB used an emergency meeting to launch a gigantic new package of quantitative easing (QE) – the electronic money creation device that has become a key tool for central banks since the financial crisis of 2008.

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Fed bids to shore up confidence after worst week in 12 years

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Pledges of help from EU, China and Germany plus declaration of US emergency produce mild rally after torrid week

The world’s most powerful central bank, the US Federal Reserve, is preparing a fresh attempt to shore up investor confidence despite a late rally on Wall Street on Friday that ended a torrid week for stock markets on a more positive note.

Fresh pledges of help from China, Germany and the European commission combined with Donald Trump’s declaration of a national emergency over coronavirus to reassure investors after an ordeal for equities on both sides of the Atlantic that echoed the depths of the banking crisis.

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Climate emergency: Lagarde says ECB must step up action

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Bank president indicates she will move bank beyond traditional remit of controlling inflation

Christine Lagarde has said the European Central Bank should do more to help tackle the climate emergency, as she came under pressure from MEPs to step up action against global heating.

In a strong hint that as president she would move the ECB beyond its traditional remit of controlling inflation, Lagarde said the bank would incorporate the climate threat into both its economic forecasts and in its capacity as watchdog of the financial system.

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Christine Lagarde calls for more public investment in first ECB speech

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President of the European Central Bank says US/China tariff war should be seen as an opportunity

Christine Lagarde has called for European governments to boost innovation and growth with higher rates of public investment, in her first major speech as president of the European Central Bank.

Speaking to an audience of bankers in Frankfurt, Lagarde said that rising trade barriers triggered by the US/China tariff war should be grasped by European governments as an opportunity to build a stronger internal market.

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ECB announces fresh stimulus as eurozone economy falters

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Mario Draghi says bank will reboot quantitative easing in month Lagarde succeeds him

The European Central Bank has announced a fresh stimulus package in an attempt to prevent the fragile eurozone economy from grinding to a halt, with an interest rate cut and plans to pump €20bn (£19bn) a month into the financial markets.

In one of his final acts in his ECB presidency, before Christine Lagarde takes charge in November, Mario Draghi said governments across the eurozone needed to take greater steps to reboot growth by ramping up public spending or cutting taxes.

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