With the reduction of the Eurosystem’s balance sheet, central bank liquidity is declining. As liquidity is unevenly distributed among banks, an effective redistribution and use of market funding are essential. This worked well so far, with limited recourse to Eurosystem’s refinancing operations argue Tom Hudepohl, Pamina Karl, Tobias Linzert, Benoit Nguyen, Marta Skrzypińska and Lia Vaz Cruz.

The original post was published on 18 June 2024.
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How banks deal with declining excess liquidity

Europe needs trillions of euros to manage climate change, become digital and defend itself. How can EU and national policymakers support these projects? Othman Bouabdallah, Ettore Dorrucci, Lucia Hoendervangers and Carolin Nerlich discuss the options in times of low growth and high public debt levels.
The original post was published on 27 June 2024.
https://www.ecb.europa.eu/press/blog/html/index.en.html


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Mind the gap: Europe’s strategic investment needs and how to support them

Firms’ inflation expectations are key for monetary policy makers. The ECB Blog presents new survey data on these expectations, evidence on what influences them, how they change when new information becomes available, and if they matter for the plans and choices firms make.

The original post was published on 4 July 2024.
https://www.ecb.europa.eu/press/blog/html/index.en.html


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How euro area firms’ inflation expectations affect their business decisions

The green transition will significantly increase demand for key minerals over the coming decades. The impact on energy prices will ultimately depend on how supply adjusts. Jakob Feveile Adolfsen, Danielle Kedan and Marie-Sophie Lappe look at the geopolitical risks involved.  

The original post was published on 10 July 2024.
(https://www.ecb.europa.eu/press/blog/html/index.en.html)

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The geopolitics of green minerals

Repo markets are vital for banks to source liquidity and securities. They also represent an essential link in the monetary policy transmission chain. While the Eurosystem is in the process of reducing its market footprint, repo markets are going through a phase of change. Svetla Daskalova, Federico Maria Ferrara, Pedro Formoso da Silva, Pamina Karl and Thomas Vlassopoulos look at dynamics in this market.

The original post was published on 23 July 2024. https://www.ecb.europa.eu/press/blog/html/index.en.html

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Repo markets: Understanding the effects of a declining Eurosystem market footprint

Central banks choose their words very carefully. And rightly so – policy makers’ wording can move markets and, eventually, the economy. This ECB Blog post shows how unexpected changes in communication influence growth and inflation.

The original post was published on 31 July 2024.
https://www.ecb.europa.eu/press/blog/date/2024/html/ecb.blog240731~61a58b1e4a.en.html

You can find a related post on the effects of central bank communication here: https://www.ecb.europa.eu/press/blog/date/2023/html/ecb.blog230809~f101598a82.en.html

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How central bank communication affects the economy

How quickly do consumers react to rate hikes? The answer depends in part on how much they know about financial matters. Evangelos Charalambakis, Omiros Kouvavas and Pedro Neves look at how the better informed they are, the quicker their reaction.

The original post was published on 24 August 2024.
https://www.ecb.europa.eu/press/blog/html/index.en.html

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Rate hikes: How financial knowledge affects people’s reactions

Euro area exporters are facing tougher competition from China. But why is that? Alexander Al-Haschimi, Lorenz Emter, Vanessa Gunnella, Iván Ordoñez Martínez, Tobias Schuler, and Tajda Spital look at the important role played by price competitiveness and the ongoing industrial upgrades being made in China.

The original post was published on 3 September 2024.
https://www.ecb.europa.eu/press/blog/date/2024/html/ecb.blog240903~57f1b63192.en.html

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Why competition with China is getting tougher than ever

Energy-intensive firms continue to suffer from low profit margins even as energy prices have fallen from their peak. Gert Bijnens, Cédric Duprez and John Hutchinson discuss implications for the green transition in the EU. 

The original post was published on 17 September 2024.
https://www.ecb.europa.eu/press/blog/date/2024/html/ecb.blog20240917~3e520c3ccf.en.html

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Obstacles to the greening of energy-intensive industries

Hedge funds have substantially increased their trading activity in euro area government bond and repo markets. Federico Maria Ferrara, Tobias Linzert, Benoit Nguyen, Imène Rahmouni-Rousseau, Marta Skrzypińska and Lia Vaz Cruz evaluate how this plays out for market functioning and intermediation.

The original post was published on 23 September 2024.
https://www.ecb.europa.eu/press/blog/date/2024/html/ecb.blog20240923~d859db790b.en.html

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23 September 2024

Hedge funds: good or bad for market functioning?

The job of central banks is to help the economy navigate shocks and steer inflation back to target. Ema Ivanova, Thomas McGregor, Stefano Nardelli and Annukka Ristiniemi ask what we can learn from past monetary policy cycles about how to control inflation while achieving a soft landing of the economy.

The original post was published on 25 September 2024.
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Delivering a soft landing: a historical perspective of monetary policy cycles

The ECB Blog offers new insights on the economy and central bank policies based on our data, analysis and research - for the euro area and beyond. For the full texts of our posts, including visuals, please visit our website.

Posts are authored by ECB staff and the audio versions are machine generated. The views expressed are those of the posts' authors and not necessarily those of the European Central Bank and the Eurosystem.

How banks deal with declining excess liquidity

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