According to estimates by leading German research institutes, the European Central Bank will take much stronger countermeasures in light of persistent inflation than previously thought in the stock exchange.
European Central Bank (European Central Bank) According to estimates by leading German research institutes, much stronger countermeasures will be taken in view of the persistent rise in inflation than previously thought in the stock exchange. “As the ECB’s 2023 inflation outlook is likely to be revised upwards, it is likely that monetary policy will tighten much more than what is currently expected in the markets,” the institutes said in Thursday’s fall report.
The institutes expect to raise interest rates two more times this year, which will raise the key rate to 2.25 percent. It is currently 1.25 percent. “Further interest rate steps will follow in the first half of 2023,” the report said. Then the base rate will be around 3.25%. In July, the European Central Bank began shifting interest rates to combat the persistent rise in inflation, raising key interest rates for the first time since 2011. With its second rate move in September, it was followed by a giant 0.75 percentage point move. The next pricing meeting is October 27.
The institutes also predict that the ECB will not reissue targeted long-term credit payments to banks – known in the professional world as “TLTRO”. They also assume that the euro central bank will not resume its net bond purchases in the current buying programs. “However, the reinvestment of outstanding securities should continue for the time being,” they explained. The central bank will continue to use PEPP reinvestment to offset major differences in government bond yields in euro countries. If that wasn’t enough, the institutes expect the European Central Bank (TPI) to use its new bond buffer to support heavily indebted euro countries.
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