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Tag Archives: European Central Bank (ECB)

How have the European Central Bank’s negative rates been passed on?

Negative rate cuts are not that different from ‘standard’ rate cuts. Like them, they reduce banks’ margins, but this effect does not appear to be amplified below 0%. Since the global financial crisis, several central banks have deployed negative policy rates, after exhausting conventional easing measures. The European Central Bank introduced its negative interest rate policy (NIRP) in June 2014 when it cut its deposit facility rate below 0% for the first time, to -0.1%. Since then, the rate...

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What to expect from the ECB’s monetary policy strategy review?

Emphasis will be placed on greening monetary policy and clarifying the ECB's price stability objective, but is this enough? By: Maria Demertzis Date: June 23, 2021 Topic: European Macroeconomics & Governance This piece was originally published in the Money Review section of Kathimerini and El Economista. The COVID-19 pandemic forced the European Central Bank (ECB) to postpone the review of its monetary policy strategy, or how it goes about ensuring price stability in the...

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Inflation!? Germany, the euro area and the European Central Bank

There is concern in Germany about rising prices, but expectations and wage data show no sign of excess pressures; German inflation should exceed 2% to support euro-area rebalancing but is unlikely to do so on sustained basis. By: Guntram B. Wolff Date: June 9, 2021 Topic: European Macroeconomics & Governance Public inflation scare? An inflation scare has erupted – at least in some countries. Interest in the term ‘inflation’ as measured by Google searches has hit a high in the...

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What Are the Effects of the ECB’s Negative Interest Rate Policy?

This paper explores the potential effects (and side effects) of negative rates in theory and examines the evidence to determine what these effects have been in practice in the euro area. Several central banks, including the European Central Bank since 2014, have added negative policy rates to their toolboxes after exhausting conventional easing measures. It is essential to understand the effects on the economy of prolonged negative rates. This paper explores the potential effects (and side...

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Emergency Liquidity Assistance: A new lease of life or kiss of death?

Use of Emergency Liquidity Assistance to prop up euro-area banks needs to be more transparent; available evidence suggests its use has not always been within the rules. The Eurosystem, headed by the European Central Bank (ECB), provides liquidity to banks, and through them to the entire economy, through five channels. One, the Marginal Lending Facility, has always been small and has practically disappeared since 2008, when the ECB greatly increased the size of its operations. Two of the other...

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Central banks don’t have to pick winners and losers to fight climate change

Disclosures and financial regulation don’t get enough respect as tools to reduce emissions. Suddenly central banks are in the middle of the climate-policy debate and it always seems to zoom in on one question: Should they stop buying “brown” bonds? Either yes, and the traditional inflation-fighting mandate goes out the window, or no and the central bank is leaving the planet to burn. The truth is, there is a lot that the European Central Bank, the Federal Reserve and other global leaders can...

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Can central banks save the planet?

“We are not going to lead our society to a low-carbon economy by continuing to finance the status quo. “ Central bankers now seem keen to take on responsibility for policy objectives they have previously shied away from – in particular, tackling climate change. European Central Bank President Christine Lagarde acknowledged in January that central bankers will have to look beyond their traditional duties to address the challenge. ECB Executive Board Member Isabel Schnabel said in September...

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A brown or a green European Central Bank?

The European Central Bank portfolio is skewed towards the brown economy, reflecting a bias in the market. Can and should the bank deviate from the market allocation? Climate change is a hotly debated issue in the European Central Bank’s ongoing strategy review. While ECB president Christine Lagarde and her colleagues at the centre favour robust tools to tackle climate change, most national central bank governors (like their colleagues at the US Fed) seem to be against including climate...

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Central banking’s brave new world

Ever since the 2008 financial crisis, central bankers have been busy developing new policy instruments to fight fires and ward off emerging threats. Nonetheless, many secretly dreamed of returning to the good old days of cautious conservatism (with financial stability taken seriously). By: Jean Pisani-Ferry Date: February 24, 2021 Topic: Global Economics & Governance This opinion piece was originally published in Project Syndicate. Twenty years ago, central bankers were...

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US separates climate concerns from financial oversight in contrast to EU activism

Different EU and US supervisory approaches to climate risk may hamper efforts to work together and risk fragmenting global markets. By: Rebecca Christie Date: February 18, 2021 Topic: Finance & Financial Regulation Climate change is a growing financial risk as well as an environmental threat. Increasingly, banks and asset managers are seeking ways to prevent future climate shocks from upending their businesses, while investors often seek ways to push their financial resources...

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