My subscription
...
Filters
My Subscription All Publications

ECB may need more than promises to contain spreads

The prospect of tighter monetary policy in the euro-zone has raised the threat of a bigger sell-off in the region’s bond markets. If this happens, we think the ECB would ultimately intervene to prevent any lasting damage. But we doubt that it will agree the details of a new QE programme until it is urgently needed and, as a result, we think the euro-zone bond market is vulnerable to a sharp sell-off.
Andrew Kenningham Chief Europe Economist
Continue reading

More from Europe

European Economics Update

Answers to your questions on the ECB

We held a Drop-In today to discuss our views on the ECB and what the chances are of a further hawkish surprise in the coming weeks. (You can see an on-demand recording here.) This Update answers several of the questions that we received, some of which we couldn’t answer during the event.

24 May 2022

European Economics Update

Rising interest costs add to pressure on EZ households

We estimate that euro-zone households’ debt interest payments will quadruple as a share of income over the next couple of years as the ECB raises its policy rate. This will put yet further strain on households which are already struggling with higher costs and as such weigh on economic growth. ECB Drop-In (24th May 10:00 ET/15:00 BST): Could the ECB deliver a hawkish surprise? Join economists from our Europe and Markets teams for a discussion about what to expect from the Bank’s tightening cycle, including the chances for a bumper hike in July or even an early move at next month’s meeting. Register now.

24 May 2022

European Data Response

Euro-zone Flash PMIs (May)

The small fall in the euro-zone Composite PMI in May suggests that activity is holding up better than we had feared. But the services rebound is likely to run out of steam amid high inflation and the drop in new orders bodes ill for industry. So GDP growth is still likely to be weak for much of this year. ECB Drop-In (24th May 10:00 ET/15:00 BST): Could the ECB deliver a hawkish surprise? Join economists from our Europe and Markets teams for a discussion about what to expect from the Bank’s tightening cycle, including the chances for a bumper hike in July or even an early move at next month’s meeting. Register now.

24 May 2022

More from Andrew Kenningham

European Data Response

Euro-zone GDP (Q1 2022) and Flash HICP (April)

The small increase in euro-zone GDP in Q1 means that the region will avoid a technical recession in the first half of the year. But rising inflation and the fallout from the Ukraine war mean that GDP is likely to contract in Q2, while April’s further big increase in core inflation strengthens the case for a July rate hike.

29 April 2022

European Data Response

Germany & Spain Flash Inflation (April)

The further rise in headline inflation in Germany, and increase in the underlying rate in Spain, suggest that euro-zone inflation will come in around 7.4% in April. This will do nothing to change the growing sense at the ECB that they need to raise rates sooner rather than later. A July hike seems most likely.

28 April 2022

European Data Response

German Ifo Survey (April)

The Ifo survey for April was a little stronger than we had expected and suggests that the services sector in particular is growing rapidly. But the index is still well below its pre-Ukraine war levels and is consistent with our view that German GDP is likely to contract in the second quarter. Drop-In (Thurs., 14:00 BST): Nordic & Swiss – Shortly after the Riksbank meeting, economists from our Europe and Markets services will be online to discuss the monetary policy outlook for the region’s economies and currencies as the ECB turns hawkish. Register now.

25 April 2022
↑ Back to top