EZ Datanote: ECB Press Conference, December

In one line: ECB hawks to markets; “we’re the captain now”.

Claus Vistesen (Chief Eurozone Economist)Eurozone

28 Oct 2022 Eurozone Monitor The ECB Policy Pivot is On, But it Will be a Small One, at First

• The ECB lifts its deposit and refinancing rates by 75bp, hinting at a smaller hike in December.
• The retrospective change in TLTRO III conditions is a bad look for the ECB, but it likely was necessary.
• The slide in consumer confidence has ended; but don’t expect a sustained recovery until after winter.

Claus Vistesen (Chief Eurozone Economist)Eurozone

26 Oct 2022 Eurozone Monitor We Look for 75bp from the ECB this Week, as does Everyone Else

• The ECB will hike its deposit and refinancing rates by 75bp this week; anything else would be a shock.
• We think this is the last 75bp hike in this cycle, but we doubt the ECB will confirm this on Thursday.
• The ECB is under pressure to announce a new policy on reserve remuneration; the devil is in the detail.

Claus Vistesen (Chief Eurozone Economist)Eurozone

27 Sept 2022 Eurozone Monitor The 2s10s Bund Curve is about to Invert; What Happens Next

• Bond yields in Germany are rising at their fastest pace this side of reunification.
• The German 2s10s yield curve has collapsed to zero; we think it will invert soon.
• Normally, an inverted yield curve points to a policy mistake by the central bank, but not this time.

Claus Vistesen (Chief Eurozone Economist)Eurozone

26 Sept 2022 Eurozone Monitor More Recessionary PMI Data in the EZ

• The EZ composite PMI sank further in September, consistent with GDP falling in the third quarter
• Supply-side tensions eased in September, but higher energy costs drove a rise in input price inflation.
• Markets look for the ECB deposit rate to end 2022 at 2.25, with 75bp more in 2023; that's too much. 

Claus Vistesen (Chief Eurozone Economist)Eurozone

13 Sept 2022 Eurozone Monitor The ECB is Playing a Risky Game, but it has no Choice

• No one knows how the EZ economy will respond to a 250-to-300bp increase in interest rates.
• But the ECB is not necessarily making a policy mistake; the surge in inflation can’t be ignored.
• Sustained fiscal stimulus and a resilient labour market offer hope that the ECB will get away with it.

Claus Vistesen (Chief Eurozone Economist)Eurozone

9 Sept 2022 Eurozone Monitor The ECB is Taking no Prisoners; We see Another 75bp in October

• The ECB goes big with a 75bp rate hike, and we are inclined to look for another 75bp in October.
• We think the ECB wants to get its main policy rates to 2-to-2.5%, between now and Q1 next year.
• The ECB now sees the EZ economy stalling in H2-22, but rates will continue to increase.

Claus Vistesen (Chief Eurozone Economist)Eurozone

8 Sept 2022 Eurozone Monitor EZ GDP Growth Comfortably Beat Expectations in H1-2022

• The EZ economy grew by 1.0pp more than the ECB expected in H1, supporting a 75bp hike today.
• Consumers’ spending rose strongly in Q2, even as real wages fell; that won’t be repeated in H2.
• Inventories and net trade will be a drag on growth in H2, helping to push the EZ economy into recession.

Claus Vistesen (Chief Eurozone Economist)Eurozone