Economy
European Central Bank news: ECB to start cutting balance sheets in Q2
The European Central Bank (ecb) today discussed principles for normalizing its balance sheet, which has swelled to nearly 5 trillion euros after years of asset purchases by the regulator.
“From March 2023 onwards, the portfolio of bonds purchased by the ECB under the Asset Purchase Program (APP) will shrink at a restrained and predictable pace, as the central bank will not reinvest proceeds from bonds being redeemed. The asset portfolio will shrink by an average of 15 billion euros a month until the end of the second quarter of 2023, after which the ECB will determine the further pace of its reduction,” it said in a statement.
European Central Bank news reported that following the February meeting the ECB Governing Council will announce details of the “quantitative tightening” program. It intends to regularly review its pace to be sure that the program “is consistent with the overall monetary policy strategy. Also against this background, EURO-BUND Futures could fall.
As reported, the ECB raised all three key interest rates today by 50 basis points (bps). The benchmark interest rate on loans was raised to 2.5%, the deposit rate to 2% and the rate on margin loans to 2.75%. The ECB said in a statement that the regulator will continue to raise rates amid high inflation.
“The Governing Council believes that interest rates will need to rise substantially in order to reach levels restrictive enough to ensure a timely return of inflation to the 2% target,” the ECB said. – “Keeping interest rates at levels that limit economic activity will lead to a slowdown in inflation over time by restraining demand. It would also cut the risk of a sustained increase in inflation expectations, the European Central Bank said in a statement.
“Future decisions by the ECB’s Governing Council will depend on incoming data and will be taken at subsequent meetings,” the statement said.
We previously reported that U.S. industrial production fell 0.2% in November; growth was expected.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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