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ECB-Meeting of 13-14 December 2023 Account of the monetary policy meeting of the Governing Council of the European Central Bank
January 18, 2024--Held in Frankfurt am Main on Wednesday and Thursday, 13-14 December 2023
1. Review of financial, economic and monetary developments and policy options
Financial market developments
Ms Schnabel noted that since the Governing Council's previous monetary policy meeting on 25-26 October 2023 the narrative in financial markets had entirely turned around, proving once again its high sensitivity to incoming data and central bank communication.
Markets had turned bullish, driven by expectations of quick and "immaculate" disinflation and an early and sharp monetary policy reversal. This repricing had supported risk asset prices, with equity markets soaring and sovereign and corporate credit spreads narrowing amid continued smooth market absorption. Buoyant risk asset markets and a stronger euro exchange rate were consistent with investors pricing in a bottoming-out rather than a deterioration in the euro area's economic growth momentum.
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Source: ecb.europa.eu
Monetary Policy Pass-Through to Interest Rates: Stylized Facts from 30 European Countries
January 12, 2024--Summary:
The extent to which changes in monetary policy rates lead to changes in loan and deposit rates for households and firms, referred to as 'pass-through', is an important ingredient of monetary policy transmission to output and prices.
Using data on seven different bank interest rates in 30 European countries, different approaches, and the full sample as well as a subsample of euro area countries, we show that a) the pass-through in the post-pandemic hiking cycle has been heterogenous across countries and types of interest rates; b) the pass-through has generally been weaker and slower, except for rates of non-financial corporation loans and time deposits in euro area countries; c) differences in pass-through over time and across countries for most deposit rates are correlated with financial sector concentration, liquidity, and loan opportunities, and d) the effects of pass-through to outstanding mortgage rates on monetary transmission on prices and output are heterogenous across countries.
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Source: imf.org
Households and non-financial corporations in the euro area: third quarter of 2023
January 11, 2024--Households' financial investment increased at annual rate of 1.9% in third quarter of 2023, after 2.1% in previous quarter
Non-financial corporations' financing grew at broadly unchanged rate of 0.7%
Non-financial corporations' gross operating surplus increased at annual rate of 2.2%, after 5.9% in previous quarter
Households
Household gross disposable income increased in the third quarter of 2023 at a lower annual rate of 6.4% (after 8.3% in the second quarter), as the main components grew at lower rates: compensation of employees increased at a rate of 6.6% (after 7.0%), and gross operating surplus and mixed income of the self-employed grew at a rate of 6.2% (after 7.4%). Household consumption expenditure increased at a lower rate of 5.0% (after 6.9%).
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Source: ECB
ESMA publishes latest edition of its newsletter
January 11, 2024--The European Securities and Markets Authority (ESMA), the EU's financial markets regulator and supervisor, has today published its latest edition of the Spotlight on Markets Newsletter.
Your one-stop-shop in the world of EU financial markets focused in December on the European Securities and Markets Authority (ESMA) latest report on Cost and Performance of retail products. In this annual report, ESMA finds that the average costs of investing in key EU retail financial products has declined by the end of 2022. However, cost heterogeneity persisted across EU Member States.
In addition, ESMA is expected to launch its first Common Supervisory Action on ESG disclosures for Benchmarks Administrators. It is the first CSA for ESMA in its role as a direct supervisor of Benchmarks Administrators.
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Source: ESMA
ESMA explores risk exposures to real estate in EU securities markets and investment funds
January 10, 2024--The European Securities and Markets Authority (ESMA), the EU's financial markets regulator and supervisor, is publishing its first analysis of the exposures the EU securities and markets and asset management sector have to real estate.
The analysis suggests that:
Debt levels in the real estate sector are elevated with wider risk implications from non-bank financial market players.
Interlinkages with the banking system are important and arise through entity exposures and activities. Through these, sector shocks may get transmitted across the EU financial system.
Going forward, interest rate risk can be expected to continue to shape real estate market exposures. Credit risk indicators for real estate companies have started to show signs of deterioration and liquidity mismatches remain a key vulnerability for real estate investment funds.
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Source: ESMA
Euro area inflation rises less than expected in December
January 5, 2024--Eurozone inflation in December rose by 2.9% year-on-year, less than the 3% expected, ending a seven-month decline streak. Monthly, the inflation rate increased by 0.2%. Core inflation, excluding energy and food, hit 3.4%.
November's PPI fell by 0.3%, with a significant yearly drop of 8.8%.
Annual inflation in the Eurozone rose again in December after seven consecutive months of declines, albeit at a slower rate than anticipated.
According to the latest flash estimates released Friday by Eurostat, the harmonised consumer price index (HICP) in the Euro area recorded a year-on-year increase of 2.9% in December.
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Source: euronews.com
ECB-Euro area bank interest rate statistics: November 2023
January 5, 2024--Composite cost-of-borrowing indicator for new loans to corporations decreased by 4 basis points to 5.23%; indicator for new loans to households for house purchase increased by 10 basis points to 4.01%, both driven by interest rate effect
Composite interest rate for new deposits with agreed maturity from corporations and for overnight deposits from corporations broadly unchanged at 3.71% and 0.83%, respectively
Composite interest rate for new deposits with agreed maturity from households increased by 6 basis points to 3.33%, driven by interest rate effect; interest rate for overnight deposits from households broadly unchanged at 0.36%
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Source: ECB
UK official holdings of international reserves: December 2023
January 4, 2024--This release details movements in the international reserves of gold and assets held by the UK Government.
This monthly release shows details of movements in the UK's official holdings of international reserves, or assets.
These consist of gold, foreign currency assets and International Monetary Fund assets.
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Source: gov.uk
UK investment fund launches plunge to 20-year low as investors turn to cash
January 3, 2023--The number of new UK investment funds has reached its lowest level in two decades, according to new data, as asset managers are squeezed by rising interest rates and the cost of living.
Figures from US financial services firm Morningstar, first reported by the Financial Times, showed 397 UK funds were launched in 2023, down a quarter from the year before and the lowest since the aftermath of the dotcom crash in 2003.
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Source: msn.com
ECB-Monetary developments in the euro area: November 2023
January 2, 2023-- Annual growth rate of broad monetary aggregate M3 stood at -0.9% in November 2023, after -1.0% in October 2023
Annual growth rate of narrower monetary aggregate M1, comprising currency in circulation and overnight deposits, was -9.5% in November, compared with -10.0% in October
Annual growth rate of adjusted loans to households stood at 0.5% in November, compared with 0.6% in October
Annual growth rate of adjusted loans to non-financial corporations increased to 0.0% in November from -0.3% in October
Components of the broad monetary aggregate M3
The annual growth rate of the broad monetary aggregate M3 stood at -0.9% in November 2023, after -1.0% in October, averaging -1.0% in the three months up to November. The components of M3 showed the following developments. The annual growth rate of the narrower aggregate M1, which comprises currency in circulation and overnight deposits, was -9.5% in November, compared with -10.0% in October. The annual growth rate of short-term deposits other than overnight deposits (M2-M1) decreased to 20.8% in November from 21.4% in October. The annual growth rate of marketable instruments (M3-M2) decreased to 17.9% in November from 22.9% in October.
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Source: ECB
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