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ECB-Account of the monetary policy meeting of the Governing Council of the European Central Bank held on 8-9 June 2022
Account of the monetary policy meeting of the Governing Council of the European Central Bank held in Amsterdam on Wednesday and Thursday, 8-9 June 2022J,
July 7, 2022--1. Review of financial, economic and monetary developments and policy options
Financial market developments
Ms Schnabel reviewed the latest financial market developments. Since the Governing Council's previous monetary policy meeting on 13-14 April 2022, there had been a major shift in monetary policy expectations and actions around the world as inflation had continued to surprise to the upside.
The main developments in financial markets revolved around four main themes. First, volatility in financial markets was high by historical standards, reflecting the longer than expected persistence of high inflation and the associated uncertainty about the extent and pace of monetary policy adjustment required to restore price stability over the medium term. Second, monetary policy normalisation in the euro area was expected to proceed at a significantly faster pace than at the time of the Governing Council's 13-14 April meeting, with a rate lift-off expected in July.
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Source: ECB
ESMA publishes latest edition of its Newsletter
July 6, 2022--The European Securities and Markets Authority (ESMA), the EU's securities markets regulator, has today published its latest edition of its Spotlight on Markets Newsletter.
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Source: ESMA
Mobilising EU investors to narrow the developing-country climate-finance gap
July 6, 2022--The EU needs to address through blending of public and private funds the lack of private climate finance being channelled to low- and middle-income countries
Collectively, the European Union and its members are the largest providers of public sector funds for climate mitigation and adaptation in developing countries.
The European Commission's sustainable finance strategy, updated in July 2021, set the goal of also scaling up the so-far miniscule private climate finance in low- and middle-income countries. This tied in well with the change of strategy at the European Investment Bank, which in December 2020 re-styled itself as a 'climate bank', and whose sizable balance sheet could be deployed outside the EU.
If designed well, a blending of public EU resources with the ample private institutional capital that targets sustainability outcomes could mobilise substantial funds. To identify the right partners, any new EU scheme should be announced ahead of the United Nations COP27 climate summit in November 2022, which will be hosted by Egypt and will focus on developing countries.
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Source: bruegel.org
How rate increases could impact debt ratios in the euro area's most-indebted countries
July 5, 2022--Debt-to-GDP ratios should continue to fall in euro-area countries despite rising interest rates, though after 2023 the situation might vary across countries
Spreads versus German yields for the euro-area countries with the highest debt-to-GDP ratios have increased significantly since September 2021. Even if spreads are not yet at the worrying levels of previous stress episodes (and have decreased since the European Central Bank's 15 June announcement that it is finally working on a new fragmentation tool), this increase could still represent a risk at a time when growth is slowing quickly because of the energy crisis caused by Russia's invasion of Ukraine, and when many countries have historically high levels of debt after the highly expansive fiscal policy put in place during the COVID-19 crisis.
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Source: bruegel.org
ECB-Euro area bank interest rate statistics: May 2022
July 5, 2022--Composite cost-of-borrowing indicator for new loans to corporations increased by 4 basis points to 1.55%, driven by the interest rate effect, while indicator for new loans to households for house purchase increased by 17 basis points to 1.78%, driven by the interest rate effect
Composite interest rate for new deposits with agreed maturity from corporations broadly unchanged at -0.24%, with interest rate for overnight deposits from corporations unchanged at -0.04%
Composite interest rate for new deposits with agreed maturity from households broadly unchanged at 0.25%, with interest rate for overnight deposits from households unchanged at 0.01%
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Source: ECB
Research: UK official holdings of international reserves: June 2022
July 5, 2022--This release details movements in the international reserves of gold and assets held by the UK government.
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Source: gov.uk
ESMA-Sustainable Finance-implementation timeline
July 1, 2022--Implementation timeline for SFDR|TR|CSRD|MiFID|IDD|UCITS|AIFMD.
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Source: ESMA
Eurozone new inflation record adds pressure on ECB
July 1, 2022--Scorching rise continues to be primarily driven by energy prices.
Eurozone inflation surged to a record high of 8.6 percent in June, racing ahead of expectations once again and adding pressure on the European Central Bank to step up its fight against spiralling prices, flash Eurostat data showed today.
A Reuters poll of analysts had pointed to a record 8.4 percent jump in June, up from 8.1 percent in May.
Scorching inflation continues to be primarily driven by energy prices, which were up 41.9 percent in June compared with 39.1 percent in May. That's followed by food, alcohol and tobacco prices, which were up 8.9 percent in June compared with 7.5 percent in the previous month.
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Source: politico.eu
The implications for public debt of high inflation and monetary tightening
June 29, 2022--Expected increases in interest rates and reductions in real GDP growth rates will result in relatively small increases in public debt-to-GDP ratios, but inflation will reduce debt ratios very substantially
Rising inflation has triggered monetary tightening in several countries. The Federal Reserve and the Bank of England have already increased their key interest rates, while the European Central Bank will start to hike rates soon.
Higher interest rates raise concerns about public debt sustainability in countries with high public debt. In the euro area, government bond yields have already started to increase in anticipation of ECB monetary tightening. The increase has been higher in higher-debt countries, such as Greece and Italy, than in lowe-debt such as Germany and the Netherlands. Economic slowdown in the wake of the Russian invasion of Ukraine might aggravate debt sustainability concerns.view more
Source: bruegel.org
ECB-Monetary developments in the euro area: May 2022
June 29, 2022-- Annual growth rate of broad monetary aggregate M3 decreased to 5.6% in May 2022 from 6.1% in April (revised from 6.0%)
Annual growth rate of narrower monetary aggregate M1, comprising currency in circulation and overnight deposits, decreased to 7.8% in May from 8.2% in April
Annual growth rate of adjusted loans to households stood at 4.6% in May-unchanged from previous month
Annual growth rate of adjusted loans to non-financial corporations increased to 5.8% in May from 5.2% in April
Components of the broad monetary aggregate M3
The annual growth rate of the broad monetary aggregate M3 decreased to 5.6% in May 2022 from 6.1% in April, averaging 6.0% in the three months up to May. The components of M3 showed the following developments.
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Source: ECB