Christine Lagarde in spotlight at first ECB meeting – business live – The Guardian, Theguardian.com
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ECB presses on with stimulus plan
(has also confirmed that it has restarted its stimulus program, in an attempt to push inflation up.
It is buying € bn of assets each month with newly-created money, and expects to keep running it “for as long as necessary”. The program will end “shortly before” interest rates are raised, it adds.
This was Mario Draghi’s final major decision as ECB president before he stepped down at the end of October.
The presidency may have changed, but the message from Frankfurt is the same: Eurozone interest rates will stay at record lows for some time.
The ECB says:
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The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.
(********** has left all three policy rates at record lows.
Its headline borrowing rate remains at zero, an all-time low. Good news for borrowers, but not for savers.
It has also maintained a negative interest rate for banks who deposit money in its vaults, at MINUS 0.5%. That’s meant to encourage them to lend to the real economy.
The ECB’s marginal lending facility, used by banks for short-term loans, will still charge a 0. 27% rate.
by leaving interest rates at their current record low.
More to follow ….
(********************************************************************** (******************************************** (************************************************ (********************************************** (****************************************************(******************************************** (************************************************** (**************************************************(**********************************************************************************************************(**************************************************The ECB headquarters in Frankfurt, Germany. Photograph: Kai Pfaffenbach / Reuters (******************************************************
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Election day jitters seem to be weighing on the pound now.
After a bright start, sterling has dipped back from this morning’s 8-month high. It’s now down a third of a cent at $ 1. (****************************************************************************************************************************************************************************************************************************************************************************************.
That’s its lowest level since … * checks Refinitiv terminal * … yesterday lunchtime, so hardly a major move. But it suggests anxiety over the result of today’s election, as a hung parliament cannot be ruled out.
Today’s ECB governing council meeting could be a more consensual affair than normal.
Mario Draghi’s tenure saw some epic tussles, given the opposition to his stimulus plans from some central bank governors (eg Jens Weidmann of Germany).
Olivier Konzeoue, FX Sales Trader atSaxo Markets, reckons Christine Lagarde will look for more consensus.
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Let’s bear in mind Lagarde who is a lawyer by trade will have to rely heavily on ECB council members to form the Eurozone central bank’s future policy.
As numerous ECB speakers have expressed their concerns on the prolonged use of negative rates of late, markets will watch communication on the matter carefully in order to find clues whether a consensus arose from discussions, potentially implying a break away from Draghi’s ‘do whatever it takes’ stance in the foreseeable future
The ECB governing council’s meeting should be drawing to a close soon, with today’s decisions due to be announced in an hour and 20 minutes.
Neil Mackinnon, global macro strategist atVTB Capital, suspects that hawkish members will prevent Christine Lagarde from easing monetary policy:
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“Today’s ECB policy meeting is the last of the year and the first for ECB President Christine Lagarde. A split in the ECB Governing Council, with hawks expressing concerns about the side-effects of negative interest rates, as well as the expansion in the ECB’s balance sheet, presents a challenge for Lagarde.
The markets think her hands are tied and the markets are giving only a 32% probability to a rate cut prior to September 2101. Compared with the Fed’s balance sheet expansion, it is understandable why a growing number of currency strategists are looking for a stronger euro and weaker dollar in 2020. ”
Eurozone factory output has fallen again, reminding Christine Lagarde that policymakers must do more to help the Euro economy.
Industrial production across the eurozone shrank by 0.5% in October, Eurostat reports. On an annual basis, production was 2.2% lower than in October
Production of heavy-duty machinery, or capital goods, dropped sharply, along with intermediate goods (products used to construct a finished item). That’s a sign that businesses are being cautious.
Eurostat says:
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In the euro area in October (**************************************************************************************************************************************************************************************************************************, compared with October (**************************************************************************************************************************************************************************************************************************************, production of both intermediate goods and capital goods fell by 3.6% and energy by 2.5%, while production of durable consumer goods rose by 0.9% and nondurable consumer goods by 2.7%.
(**********************************************************EU_Eurostat(@ EU_Eurostat)(euro area) ************************************************************************************* # IndustrialProduction-0.5% in October over September, -2.2 % over October ************************************************************************ (https://t.co/CVTW9q4NtI pic.twitter.com/o1sBW1NjdC,
Stocks are rising in London this morning, pushing the FTSE 131 to its highest level in over a week.
The blue-chip index has gained points at one stage to 7 , points, the highest since 3rd December. Financial stocks, energy firms, industrials and telecoms companies all gained ground.
(************************************************************************************************************************************************************************************** (********************************************************************************** (********************************************** (************************************************ (************************************************(************************************************************************************ (************************************************************************************************** (**********************************************************(**************************************************** (********************************************************(**********************************************************(************************************************** (********************** (The FTSE) risers and fallers, (December) ********************************************************************************************************************************************************************************************************************************** (Photograph: Refinitiv (******************************************************
*********** (AJ Bell) **************** (investment director) Russ Moldsays the City is calm:
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Investors seem calm on the eve of the UK General Election with the FTSE 138 up modestly and sterling steady, having recovered from a sell-off early yesterday on signs the polls were tightening ….
All eyes will likely be on an exit poll at (pm tonight which should offer some guide to the ultimate outcome. ”
The pound hit a new eight-month high against the dollar this morning, before slipping back.
It touched $ 1. 4678 for the first time since late March. That’s 10 Cents higher than in mid-October, just before Boris Johnson managed to renegotiate the UK Brexit deal.
The pound has rallied through the general election campaign, but anxiety over the result is rife. As I type, sterling is back to $ 1. (**************************************************************************************************************************************************************************************************************************************************************************************, slightly lower on the day, with
With Britain heading to the polling stations today, City traders are trying to protect themselves from losses when the exit polls are released tonight .
Sterling volatility has soared overnight, hitting its highest level since the Brexit vote in 2016. That means that investors are expecting the pound to move sharply once the result of the election becomes clear.
Traders have also been rushing to buy put options on sterling – contracts that allow you to sell the pound at a certain price.
Reuters has the details:
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The premium for pound puts over calls over the next week jumped to its highest since September 2019 at nearly 6%. That means more investors are wanting downside protection by buying the right to sell the pound over the next week.
The City has been watching the opinion polls closely, with signs that the gap between the Conservatives and Labor has narrowed during the campaign.
We’ll find out how accurate they are at (****************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************, pm, when the first exit polls are released, but it may take until the early hours of Friday morning for the result to become clear.
The ECB have got their Christmas tree decorated, outside the Frankfurt HQ:
Annette Weisbach(@ AnnetteCNBC)It’s Christine (# Lagarde) ‘s first # ECBmeeting today, all eyes are on her and her style to lead the ECB. The Xmas tree at least looks last year;) (# ECB) ********************************************************************************************************************** # Draghi @ SquawkBoxEurope pic.twitter.com/lRBSoCL0jI (December) **********************************************************************************************************************************************************************************************************************************************************************************************************************************************************************, **************************************************************************************************************************************************************************************************************************************
But will Lagarde plays Santa or Scrooge today, as she outlines her monetary policy vision?
Boom! Over in Riyadh, oil giant Aramco has become the first listed company to be valued at two trillion dollars.
Shares in Aramco jumped by 11% in early trading for the second day in a row, following its flotation yesterday. That drives its value to over two $ 2trn, extending its lead over Apple (worth $ 1.2trn).
With just 1.5% of Aramco’s stock floated, local investors are scrambling for a stake. This has driven Aramco’s stock up to (**************************************************************************************************************************************************************************************************************************************************************************************************************************************************. ************************************************************************************************************************************************************************************************************************************************************************************************************************** (riyals, from
. 2 last night. It floated at riyals .
The Saudi authorities had insisted that Aramco was worth $ 2trn, and were furious when international investors were unconvinced. This forced them to dial back the IPO, float locally, and pitch it mainly at local investors.
One option is to buy more green bonds – although that runs a risk of distorting the overall (too small) market.
John Velisof (BNO Mellonsays:
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Into the breach, the political, social and economic zeitgeist appears to have presented green bonds an opportunity to play a meaningful role in policy.
Whether it’s the US Democrats ’left wing pushing a Green New Deal, or President Lagarde orienting the ECB towards a role in combatting global warming, green bonds represent an attractive fiscal option, particularly in the eurozone.
Updated (at 3.) ******************************************************************************************************************************************************************************************************************************************************************************************************************************* am EST
Christine Lagarde will also release the ECB’s latest economic forecasts today.
They are likely to predict slow growth and weak inflation, meaning no pressure to change policy today.
Jim Reidof (Deutsche Bank) expects a cautious debut:
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Staff forecasts for GDP growth, headline inflation and core inflation are likely to be stable for the first time since the exit from the APP was announced in mid – (***************************************************************************************************************************************************************************************************************************************. The Council will likely remain cautious and view the balance of risks as still tilted to the downside. The accommodative policy stance will remain appropriate.
However, Lagarde is likely to oversee one immediate change. That is, they expect the willingness to use “all instruments” to be conditioned on an assessment of the possible side effects of policy.
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Christine Lagarde could use today’s press conference to push eurozone governments to boost spending, to fight a future of weak growth and ever- low interest rates.
Kyle Rodda of IG says:
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Monetary policy is losing its efficacy, and central bankers know that’s the case. Fiscal authorities, saddled by the decades of debt governments accumulated in the late 22 the century, have laid back since the US financial crisis, handing the reins of economic policy over to central bankers. Now, just like governments before them, central bankers are realizing the limitations of their policy tools, and want sovereigns to step back in to drive western economies back to “normal” economic conditions.
It’ll only be one moment in time for now, however President Lagarde’s speech could well define that will become the new normal for macroeconomic policy across the globe.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
There’s a new chief in town at the
European Central Bank, and she’s about to outline her strategy to drag the eurozone out of its rut.
Christine Lagarde is chairing her first monetary policy meeting in Frankfurt, where the ECB’s governing council will set interest rates and discuss its stimulus program. President Lagarde will then face the press, taking on the baton from Mario Draghi.
Will Lagarde have the same powers over the markets as the man who saved the euro? She may take a similar approach as Draghi; keeping monetary policy loose while urging politicians to do more.
We’re not expecting any changes to policy today, but Lagarde’s comments will be closely scrutinized. Her new vision for the ECB easily move the markets.
The challenges thatwarrant the ECB’s current policy stance have not disappeared. The euro area economy faces some near-term risks, mainly related to external factors, and inflation remains persistently below the ECB’s objective.
I therefore agree with the view of the Governing Council that a highly accommodative policy stance is warranted for a prolonged period of time in order to bring inflation back to “below but close to 2%”.
The former French finance minister also supports closer fiscal integration within the eurozone, to shore up the currency union. And it can’t simply wait until the next crisis. As she put it:
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In My experience as Finance Minister, I have witnessed the difficulties in coordinating fiscal policies, which are inherently focused on national issues and not the euro area perspective. That is why I am convinced that we need(both****************************************************************************************************************************************** effective and simplified rulesand a meaningful euro area fiscal instrument as a complement (*******************.
In other words, we need to further institutionalize cooperation rather than trust it will emerge in crisis times.
But that accommodative stance is unpopular with some in the eurozone, such as German savers, so Lagarde may face pressure to end the days of ultra-loose policy and negative interest rates.
Lagarde is planning a wide-ranging review of the ECB, that could lead to a revamp of its activities.
She is also keen to put the climate emergency at the heart of the bank’s plans, so we may learn today what that means in practice.
Green MEPs have already questioned how the Bank can take environmental issues seriously while buying debt issued by oil giants and car makers.
The agenda
(************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************ am GMT: Eurozone industrial production data for October
(**********************************************************************************************************************************************************************************************************************************************************************************************************************************************************************. pm GMT: ECB decision on interest rates
Updated (at 3.) ********************************************************************************************************************************************************************************************************************************************************************************************************************************************************************** am EST
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