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MONETARY POLICY

Our monetary policy statement at a glance

We have raised interest rates. Why did we decide to do that, what other decisions did we take and what is going on in the economy? Our visual statement gives short explanations in easy-to-understand language.

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MONETARY POLICY 2 February 2023

Latest ECB press conference

President Christine Lagarde and Vice-President Luis de Guindos explained the Governing Council’s latest monetary policy decisions and answered questions from journalists at a press conference.

Find out more
PODCAST 2 February 2023

Tune into our latest decisions

Our Governing Council decided on monetary policy, determining what’s needed to achieve stable prices in the euro area. Listen to this episode where President Christine Lagarde presents the decisions during our press conference.

The ECB Podcast
#AskECB 3 February 2023

Join Twitter Q&A with Isabel Schnabel

What would you like to ask our Executive Board member Isabel Schnabel? She will be answering questions live on Twitter from 15:00 CET on Friday, 10 February.

Submit your questions via #AskECB
3 February 2023
PRESS RELEASE
Related
2 February 2023
PRESS RELEASE
2 February 2023
MONETARY POLICY DECISION
2 February 2023
MFI INTEREST RATE STATISTICS
31 January 2023
WEEKLY FINANCIAL STATEMENT
Annexes
31 January 2023
WEEKLY FINANCIAL STATEMENT - COMMENTARY
2 February 2023
Christine Lagarde, President of the ECB, Luis de Guindos, Vice-President of the ECB, Frankfurt am Main, 2 February 2023
23 January 2023
Speech by Christine Lagarde, President of the ECB, at the Deutsche Börse Annual Reception in Eschborn
English
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23 January 2023
Introductory statement by Fabio Panetta, Member of the Executive Board of the ECB, at the Committee on Economic and Monetary Affairs of the European Parliament
10 January 2023
Speech by Isabel Schnabel, Member of the Executive Board of the ECB, at the International Symposium on Central Bank Independence, Sveriges Riksbank, Stockholm
Annexes
10 January 2023
6 January 2023
Presentation by Philip R. Lane, Member of the Executive Board of the ECB, in panel discussion “Global Economic Outlook” organised by the National Association for Business Economics (NABE) at 2023 ASSA Annual Meeting, New Orleans
24 January 2023
Interview with Fabio Panetta, Member of the Executive Board of the ECB, conducted by Andreas Kröner, Jan Mallien and Frank Wiebe
English
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17 January 2023
Interview with Philip R. Lane, Member of the Executive Board of the ECB, conducted by Martin Wolf on 12 January 2023
31 December 2022
Interview with Christine Lagarde, President of the European Central Bank, conducted by Marina Klepo on 19 December 2022
English
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27 December 2022
Interview with Luis de Guindos, Vice-President of the ECB, conducted on 16 December 2022
English
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24 December 2022
Interview with Isabel Schnabel, Member of the Executive Board of the ECB, conducted by Gerald Braunberger and Christian Siedenbiedel on 16 December 2022
English
OTHER LANGUAGES (1) +
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27 January 2023
The ECB’s main building in Frankfurt stands on a site linked to the atrocities of the Holocaust. On International Holocaust Remembrance Day, we affirm that tyranny and state injustice must never again prevail. Building European unity is a cornerstone of this commitment.
18 January 2023
Hit by multiple shocks, the corporate sector has increased its debt over recent years. The ECB Blog shows that strained balance sheets could significantly depress firms’ investment in the coming years with negative implications for innovation and growth.
Details
JEL Code
E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
F34 : International Economics→International Finance→International Lending and Debt Problems
G31 : Financial Economics→Corporate Finance and Governance→Capital Budgeting, Fixed Investment and Inventory Studies, Capacity
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
5 January 2023
Trading in unbacked digital assets should be treated by regulators like gambling.
4 January 2023
Borrowing has become more expensive for governments. But despite rising interest rates, government debt can remain on a sound path. The ECB Blog discusses what constitutes a favourable balance between debt costs and economic growth.
Details
JEL Code
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H30 : Public Economics→Fiscal Policies and Behavior of Economic Agents→General
E60 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→General
20 December 2022
The ECB has gauged bank resilience to interest rate shocks under different macroeconomic scenarios. ECB Vice-President Luis de Guindos and Chair of the ECB’s Supervisory Board Andrea Enria walk us through the findings.
3 February 2023
MEP LETTER
3 February 2023
MEP LETTER
3 February 2023
MEP LETTER
3 February 2023
WORKING PAPER SERIES - No. 2771
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Abstract
This paper investigates both the magnitude and the drivers of bank window dressing behaviour in euro-denominated repo markets. Using a confidential transaction-level data set, our analysis illustrates that banks engineer an economically sizeable contraction in their repo transactions around regulatory reporting dates. We establish a causal link between these reductions and banks’ incentives to window dress and document the role of the leverage ratio and the G-SIB framework as the most relevant drivers of window dressing behaviour. Our findings suggest that regulatory action is warranted to limit banks’ ability to window dress.
JEL Code
C23 : Mathematical and Quantitative Methods→Single Equation Models, Single Variables→Panel Data Models, Spatio-temporal Models
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
3 February 2023
WORKING PAPER SERIES - No. 2770
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Abstract
How do financial markets acquire information about upcoming monetary policy decisions, beyond their reaction to central bank signals? This paper hypothesises that sharing information among investors can improve expectations, especially in the presence of disagreement or uncertainty about the economy. To test this hypothesis, the paper studies monetary policy-related content on Twitter during the “quiet period” before European Central Bank announcements, when policymakers refrain from public statements related to monetary policy. Conditional on large disagreement about the economic outlook, higher Twitter traffic is associated with smaller monetary policy surprises, suggesting that exchanging private signals among investors can help improve expectations.
JEL Code
D83 : Microeconomics→Information, Knowledge, and Uncertainty→Search, Learning, Information and Knowledge, Communication, Belief
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
3 February 2023
SURVEY OF PROFESSIONAL FORECASTERS
3 February 2023
ECONOMIC BULLETIN - BOX
Economic Bulletin Issue 1, 2023
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Abstract
This box summarises the findings of recent contacts between ECB staff and representatives of 73 leading non-financial companies operating in the euro area. According to these exchanges, which took place between 4 and 12 January 2023, aggregate activity had broadly stagnated or contracted mildly in the fourth quarter of 2022, but with notable differences across sectors. The short-term outlook for activity remained subdued with much uncertainty, but there was increased hope of a pick-up in 2023. Selling prices continued to increase in aggregate, but at a moderating pace and with more variability across sectors and a less certain outlook. Wage growth was now the predominant cost concern, although wage expectations remained broadly unchanged from the previous survey round. Despite greater wage cost pressure and very high uncertainty regarding the future path of energy prices, most contacts expected lower price growth in 2023 than in 2022.
JEL Code
E2 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy
E3 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles
L2 : Industrial Organization→Firm Objectives, Organization, and Behavior
31 January 2023
THE EURO AREA BANK LENDING SURVEY
Annexes
31 January 2023
BANK LENDING SURVEY - ANNEX
Related
30 January 2023
OTHER PUBLICATION
25 January 2023
WORKING PAPER SERIES - No. 2769
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Abstract
Differences in labour market institutions and regulations between countries of the monetary union can cause divergent responses even to a common shock. We augment a multi-country model of the euro area with search and matching framework that differs across Ricardian and hand-to-mouth households. In this setting, we investigate the implications of cross-country heterogeneity in labour market institutions for the conduct of monetary policy in a monetary union. We compute responses to an expansionary demand shock and to an inflationary supply shock under the Taylor rule, asymmetric unemployment targeting, and average inflation targeting. For each rule we distinguish between cases with zero weight on the unemployment gap and a negative response to rising unemployment. Across all rules, responding to unemployment leads to lower losses of employment and higher inflation. Responding to unemployment reduces cross-country differences within the monetary union and the differences in consumption levels of rich and poor households.
JEL Code
E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
F45 : International Economics→Macroeconomic Aspects of International Trade and Finance
25 January 2023
WORKING PAPER SERIES - No. 2768
Details
Abstract
This paper compares within-sample and out-of-sample fit of a DSGE model with rational expectations to a model with adaptive learning. The Galí, Smets and Wouters model is the chosen laboratory using quarterly real-time euro area data vintages, covering 2001Q1–2019Q4. The adaptive learning model obtains better within-sample fit for all vintages used for estimation in the forecast exercise and for the full sample. However, the rational expectations model typically predicts real GDP growth better as well as jointly with inflation. For the marginal inflation forecasts, the same holds for the inner quarters of the forecast horizon, while the adaptive learning model predicts better for the outer quarters.
JEL Code
C11 : Mathematical and Quantitative Methods→Econometric and Statistical Methods and Methodology: General→Bayesian Analysis: General
C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
C52 : Mathematical and Quantitative Methods→Econometric Modeling→Model Evaluation, Validation, and Selection
C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
24 January 2023
WORKING PAPER SERIES - No. 2767
Details
Abstract
We develop a measure of overall financial risk in China by applying machine learning techniques to textual data. A pre-defined set of relevant newspaper articles is first selected using a specific constellation of risk-related keywords. Then, we employ topical modelling based on an unsupervised machine learning algorithm to decompose financial risk into its thematic drivers. The resulting aggregated indicator can identify major episodes of overall heightened financial risks in China, which cannot be consistently captured using financial data. Finally, a structural VAR framework is employed to show that shocks to the financial risk measure have a significant impact on macroeconomic and financial variables in China and abroad.
JEL Code
C32 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Time-Series Models, Dynamic Quantile Regressions, Dynamic Treatment Effect Models, Diffusion Processes
C65 : Mathematical and Quantitative Methods→Mathematical Methods, Programming Models, Mathematical and Simulation Modeling→Miscellaneous Mathematical Tools
E32 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Business Fluctuations, Cycles
F44 : International Economics→Macroeconomic Aspects of International Trade and Finance→International Business Cycles
G15 : Financial Economics→General Financial Markets→International Financial Markets
24 January 2023
WORKING PAPER SERIES - No. 2766
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Abstract
This paper provides an analysis of the impact of the COVID-19 pandemic on exporting firms, fo-cusing on the role of supply bottlenecks. Based on monthly transaction-level data for the universe of French exporters over the period January 2020-December 2021, we find that participation in global value chains increased firms’ vulnerability to the COVID-19 shock, in terms of both export perfor-mance and probability of survival in the export market, the negative impact of supply disruptions being higher for relatively more downstream firms. At the same time, the results suggest that export-ing firms benefited from sourcing of core inputs from different countries, supporting the hypothesis that diversification in global value chains fosters supply-chain resilience.
JEL Code
D22 : Microeconomics→Production and Organizations→Firm Behavior: Empirical Analysis
F14 : International Economics→Trade→Empirical Studies of Trade
F61 : International Economics→Economic Impacts of Globalization→Microeconomic Impacts
24 January 2023
OTHER PUBLICATION
23 January 2023
WORKING PAPER SERIES - No. 2765
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Abstract
Economic literature suggests that banks change their dividend payouts for three main reasons. They may be willing to signal good future profitability to shareholders to address information asymmetry, or use dividends to mitigate the agency costs, or could come under pressure from prudential supervisors and regulators to retain earnings. The COVID-19 pandemic led to introduction of sector-wide recommendation by regulators to suspend dividend payouts in view of prevailing large uncertainty. Using a panel data approach for two samples of listed and unlisted European banks, this paper provides evidence that, over a decade and a half preceding the pandemic, bank dividend payouts were adjusted in line with the three motivations found in the literature. The results are robust to selection of alternative variables representing these motivations. Banks are found not to discount expectations about future economic conditions or their own profitability when making payouts. Simulations shown in the paper suggest that, in the absence of supervisory recommendations, banks would likely have reduced the payouts only slightly in the first year of the pandemic.
JEL Code
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G35 : Financial Economics→Corporate Finance and Governance→Payout Policy
23 January 2023
WORKING PAPER SERIES - No. 2764
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Abstract
The EU is revising its emissions trading system (ETS) and plans to impose a carbon border adjustment mechanism (CBAM) on imports. We evaluate the efficacy of the ETS retrospectively and its anti-competitive effects. We find that the ETS contributed to cut greenhouse gas (GHG) emissions in the EU by 2-2.5 percentage points per year; pricier emissions and more stringent caps accelerated the EU greening process. However, some carbon leakages occurred as declining emissions in regulated industries within the EU were counterbalanced by an intensification elsewhere. Moreover, it burdened companies in regulated industries. For a comparable rise in the emission intensity of production, gross output of companies located in the EU drops more than output of companies outside the EU. In addition, the choice of purchasing high-emission inputs from within the EU translates into a competitive disadvantage for companies located within the EU. The large drop in F-type output when emissions intensity rises might signal their enhanced ability to relocate the production of high-carbon footprints intermediates to non-regulated regions. Outsourcing helps dodging the EU green regulation and the strategy becomes increasingly appealing as the sectoral coverage of the ETS is extended. A careful joint design of the CBAM and the ETS becomes thus crucial to avoid that applying the CBAM to a restricted list of imports while expanding the ETS coverage puts the EU at greater risk of carbon leakages without concretely reducing global emissions.
JEL Code
Q52 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Pollution Control Adoption Costs, Distributional Effects, Employment Effects
Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
17 January 2023
OTHER PUBLICATION
16 January 2023
SURVEY OF MONETARY ANALYSTS
16 January 2023
RESEARCH BULLETIN - No. 103
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Abstract
A safe asset is of high credit quality, retains its value in bad times and is traded in liquid markets. We show that bonds issued by the European Union (EU) are widely considered to be of high credit quality, and that their yield spread over German Bunds remained contained during the 2020 COVID-19 pandemic recession. Recent issuances under the EU’s SURE and NGEU initiatives helped improve EU bonds' market liquidity from previously low levels, also reducing liquidity risk premia. Eurosystem purchases and holdings of EU bonds did not impair market liquidity. Currently, one obstacle to EU bonds achieving a genuine euro-denominated safe asset status, approaching that of Bunds, lies in the one-off, time-limited nature of the EU’s COVID-19-related policy responses.
JEL Code
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
13 January 2023
OTHER PUBLICATION

Interest rates

Marginal lending facility 3.25 %
Main refinancing operations (fixed rate) 3.00 %
Deposit facility 2.50 %
8 February 2023 Past key ECB interest rates

Inflation rate

Inflation dashboard

Exchange rates

USD US dollar 1.0937
JPY Japanese yen 140.45
GBP Pound sterling 0.89250
CHF Swiss franc 0.9989
Last update: 3 February 2023 Euro foreign exchange rates