ECB Morphs from Euro Guardian to One of Europe's Most Powerful Institutions

The European Central Bank (ECB) has grown from having a limited mandate as guardian of the euro currency to being one of the most powerful institutions in Europe.
The ECB has taken on extra responsibilities during crises, such as bond-buying programs to support government finances during the sovereign debt crisis and COVID-19 pandemic.
The ECB is expanding its role in areas like promoting the international role of the euro, developing a digital currency, assessing climate-related financial risks, and steering lending towards green initiatives.
National governments are not interested in limiting the ECB's powers and are even appointing politicians to its governing council.
As the ECB moves into more controversial political arenas, it risks eroding its legitimacy if citizens start to object.

economist.com

Relevant topic timeline:

8/24/2023

FX Daily: Attention turns to Turkey

The Central Bank of Turkey is expected to continue its policy tightening, but doubts remain as to whether the pace of tightening will be sufficient, given the high inflation rate; meanwhile, the focus in the US is on the jobs market and the unemployment rate's impact on inflation, and pessimism reigns for the euro due to concerns about the ECB's ability to raise interest rates.

8/24/2023

The ECB’s rate-hike dilemma as eurozone business activity falls

The European Central Bank (ECB) faces a complex decision on whether to continue raising interest rates in September as eurozone businesses experience declines in outputs and new orders, with some experts suggesting a pause in rate hikes to ease pressure on the economy.

8/31/2023

Markets may have undone some of the ECB's work: Schnabel

Euro zone growth is weaker than predicted, but the need for more rate hikes by the European Central Bank is not automatically voided, according to ECB board member Isabel Schnabel, who raised concerns about investors undoing the ECB's past work and the decline in real risk-free rates counteracting efforts to bring inflation back to target.

9/5/2023

Interview with The Currency

The ECB expects core inflation to come down throughout the autumn as strong price increases from a year ago fall out of the data; however, energy and food prices are expected to remain bumpy, with inflation standing at 5.3% overall. The ECB emphasizes the need to contain the second-round effects of inflation and to make it clear that the current inflation episode is temporary. Additionally, the central bank does not believe that strategic price controls are the best way to fight inflation. The ECB's modeling approach is focused on assessing what is going on and using models to understand how it will play out, with the understanding that there are limitations to all models. Climate change and demographic transitions have implications for monetary policy, but the net impact on inflation is relatively contained. The ECB has managed to avoid peripheral spreads widening through its policy responses, including the pandemic emergency purchase program and pooled fiscal resourcing. In the future, short-term rates are expected to remain high for a while but come down in the later part of the decade, which helps contain spreads.

9/14/2023

ECB Raises Interest Rates to 4% in Latest Move to Combat High Inflation

The European Central Bank (ECB) has raised interest rates to a record high of 4% in an attempt to combat rising inflation, but suggests that this increase could be the last for the time being. The ECB expects inflation to fall in the coming years, but acknowledges that higher rates have impacted economic growth projections for the eurozone.

10/4/2023

ECB Navigates Slowing Eurozone Economy and High Inflation with Further Rate Hikes Expected

The euro area is experiencing stagnated economic activity and weakening growth, leading the European Central Bank (ECB) to adjust its monetary policy by raising interest rates to combat inflation; however, uncertainties remain regarding the transmission of monetary policy and potential risks to economic growth.

10/8/2023

ECB Chief Defends Rate Hikes But Sees Recession Risks; Pushes Climate Action

The European Central Bank (ECB) has raised its key interest rates for the tenth consecutive time in response to a series of crises and the need for price stability, although the rise has caused concerns about the level of interest rates and their impact on growth; ECB President Christine Lagarde emphasizes the need to make inflation projections more robust and to communicate effectively with the public to counter misinformation.

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Posted 9/13/2023, 8:15:02 PM

ECB Morphs from Euro Guardian to One of Europe's Most Powerful Institutions

The European Central Bank (ECB) has grown from having a limited mandate as guardian of the euro currency to being one of the most powerful institutions in Europe.
The ECB has taken on extra responsibilities during crises, such as bond-buying programs to support government finances during the sovereign debt crisis and COVID-19 pandemic.
The ECB is expanding its role in areas like promoting the international role of the euro, developing a digital currency, assessing climate-related financial risks, and steering lending towards green initiatives.
National governments are not interested in limiting the ECB's powers and are even appointing politicians to its governing council.
As the ECB moves into more controversial political arenas, it risks eroding its legitimacy if citizens start to object.

economist.com

Relevant topic timeline:

8/24/2023

FX Daily: Attention turns to Turkey

8/24/2023

The ECB’s rate-hike dilemma as eurozone business activity falls

8/31/2023

Markets may have undone some of the ECB's work: Schnabel

9/5/2023

Interview with The Currency

9/14/2023

ECB Raises Interest Rates to 4% in Latest Move to Combat High Inflation

10/4/2023

ECB Navigates Slowing Eurozone Economy and High Inflation with Further Rate Hikes Expected

10/8/2023

ECB Chief Defends Rate Hikes But Sees Recession Risks; Pushes Climate Action