Global Central Bank Observation ｜ The European Central Bank offers 50 basis points of "milestone rate hikes" to formally say goodbye to the "negative interest rate era"

The 21st Century Business Herald reporter Wu Bin reported that the inflation was close to the out of control. The Pigeon Central Bank finally ushered in the "milestone rate hike". On the eve of the crisis.

On July 21, local time, the European Central Bank announced the interest rate resolution, and unexpectedly raised interest rates of 50 basis points to say goodbye to the "negative interest rate era". After the interest rate resolution was announced, the euro rose against the US dollar, breaking through the 1.02 mark, the decline in European stocks expanded, and the yields of European bonds in Europe rose sharply.

This significant interest rate hike also means that the forward -looking guidelines have not been able to keep up with the inflation trend, and the European Central Bank has entered the "data dependence model". According to the prospective guidance of the June meeting, the European Central Bank will only gradually raise interest rates, raising 25 basis points in July, and postponing a larger interest rate hike to September.

Overall, the 50 -basis points of interest rate hikes can be described as "unexpected and reasonable." The European Central Bank governor Lagarde left room for the interest rate hike more than 25 basis on June 28. "In some cases, gradualism is obviously inappropriate. For example, if we see higher inflation and threatened the anchoring of inflation expectations, or signs of indicating that inflation has made economic potential more permanently, and it is more permanent and lost, and it is lost permanently, and it is lost permanently, and it is lost permanently, and it is lost permanently, and it will be lost permanently, and it will lose more permanently, and it will lose more permanently, and it will lose more permanently, and it will lose more permanently, and it will lose more permanently, and it will lose more permanently and lose more permanently. Limited the availability of resources, we will need to withdraw the easing policy more quickly. "

Subsequently, the inflation of the euro zone indeed burst again. The euro zone released in July exceeded expectations, hitting a record high of 8.6%, which was more than four times that of 2%of the 2%inflation target.

After this strong interest rate hike, the market is expected to raise interest rates at least 50 basis points in the next meeting to completely say goodbye to the "negative interest rate era".

"Late" interest rate hike

The European Central Bank's interest rate hike is "late."

The April CPI, which was announced on May 18, soared to a record high of 7.4%. At that time, there was a voice calling on the European Central Bank to raise interest rates at the June meeting, but the European Central Bank eventually chose to press the soldiers.

Lu Zhe, chief economist of Debon Securities, analyzed the 21st Century Business Herald that the European Central Bank's increase in interest rate hikes has missed the best time to control inflation, which may cause inflation problems to be more stubborn. At the same time, interest rate hikes means that the financing cost of the euro zone will begin, which is more unfavorable to economic growth.

From another perspective, in fact, the European Central Bank does not realize the problem of high inflation, but it is only that the rate hikes that are too rushing will stifle the economy.

On June 29, the European Central Bank President Lagarde had stated in the European Central Bank forum that she did not think that "she could go back to a low -inflation environment." "Due to the epidemic and the huge geopolitical impact we are facing now, some things have been released, and they will change the environment we live in."

FAWAD RAZAQZADA, a senior analyst at Jiasheng Group, told the 21st Century Business Herald that the European Central Bank launched a slow and cautious normalization process since the end of 2021. This is a wrong decision.

Regarding the "accident" of the European Central Bank's "unexpectedly" increased interest rates, Razaqzada analyzed that the European Central Bank clearly stated at the June meeting that 25 basis points raised interest rates in July. But since then the situation has changed a lot: the euro/USD once fell below the parity to exacerbate the pressure of input -type inflation; the CPI of the euro zone in June reached a record high of 8.6%, which was far higher than 8.1%in May; European data continued to continue Worsening, PMI and other data are worse than expected, which further heats up stagflation.

What does farewell to the "negative interest rate era" mean?

As the European Central Bank raised interest rates 50 basis points in one breath, the "negative interest rate era" has ended, and the euro zone is opening a new page.

In terms of favorable, Lu Haozhen, a researcher at the Bank of China Research Institute, analyzed the 21st Century Business Herald that bidding farewell to the era of negative interest rates can help support the euro to strengthen and activate the price signal of interest rates, which can promote economic growth to a certain extent. With the tightening market liquidity of the European Central Bank, the scale of negative interest rate bonds will continue to decline, which will prevent the continuous flow of fixed income bond funds and attract investment portfolios into the euro zone. At the same time, at the time of withdrawal of negative interest rate policies, the European Central Bank's conventional monetary policy transmission channels will gradually be unblocked, which will help strengthen the ability to regulate counter -cyclical regulation and promote the economic growth of the euro zone.

On the other hand, the rise in financing costs in the euro zone is also an indisputable fact. The risk of "fragmentation" in the euro zone has intensified. Southern European membership national bonds and German government bonds have disappeared, which has led to the increase in financing difficulties and costs in Southern Europe. It may cause sovereignty again Debt crisis. At the same time that the European Central Bank also approved the new spread control tools, the so -called anti -fragmented tools -conductive protection tool (TPI). The European Central Bank believes that TPI is an important tool for ensuring that monetary policy is passed on between member states and ensures the single nature of the policy.

In Lu Haozhen's view, the cost of lending in European high -liabilities represented by the European Central Bank to the Eagle School has soared, leading to the increase in government's sovereign debt risk. Under the impact of the new crown epidemic, Italy's implementation of a large -scale fiscal stimulus plan and a series of government assistance plans have led to its government debt scale from 134.8%of GDP in 2019 to 153.5%of 2021. When the era of negative interest rates is over, the pressure on debt repayment in European high -debt countries will increase.

To make matters worse, the turbulence in Italy has exacerbated risks, and recently, the difference between the interest and German debt has continued to increase. Although the Italian Prime Minister Dragi won the Senate's trust voting with 95 votes support/38 votes on the 20th, the Right -wing party Italian force party, the Italian Alliance Party, and the Five Star Movement of the Freee Party did not participate in the vote. A large number of abandoned votes indicate that Draggy is no longer supported by the parliament.

On the 21st local time, the Italian Prime Minister Dragi went to the Presidential Palace to submit his resignation again. This time Italian President Matarera accepted Draji's resignation in the Presidential Palace. The Presidential Palace of Italian said Matretala asked Dragger to continue his office as a guardian prime minister to deal with the current affairs. Italy may hold a general election in September.

In the bond market, Italian Treasury bonds have been sold on the 20th. Italian 10 -year Treasury yields rose 6.1 basis points on the same day to 3.374%, while German 10 -year Treasury yields fell 1.9 basis points to 1.250%. The interest rate difference between the annual Treasury bonds further enlarged to 216 basis points. On the 21st, Matarera accepted Dragig's resignation, and Italy once again ushered in double killing of stock bonds. The interest rate difference between the 10 -year Treasury bonds of Italy expanded to nearly 240 basis points.

"The Road to Differential" must continue

Although there is already the "Learning of the front car" of the Federal Reserve, the European Central Bank still misjudges the inflation situation again, allowing inflation to change from a small problem to a big problem. To some extent, the inflation problem is almost "ill".

Affected by the rise in food and energy prices, the inflation rate in the euro zone continued to rise in June. According to data released by the EU Statistical Bureau on the 19th, after the euro zone and CPI increased by 8.1%year -on -year, in June, it continued to soar to 8.6%, renewing the highest level of history.

Therefore, some people have criticized the European Central Bank's interest rates far behind the inflation curve, especially compared with the Eagle Central Bank such as the Federal Reserve. However, some people pointed out that the European Central Bank's sharp interest rate hike may exacerbate economic recession.

It should be noted that when the political crisis and shortage of natural gas in Italy may lead to the decline in the European economic recession, the European Central Bank's interest rate hike will inevitably suppress the economy that has been slowed down. If Russia stops winter energy supply, the risk of recession will intensify.

The latest economic forecast released by the European Union shows that the economic growth rate of the euro zone in 2022 decreases from 2.7%in spring to 2.6%, and the growth expectations of next year will significantly drop from 2.3%to 1.4%. At the same time, the European Executive Committee stated on the 20th that the consumer confidence index of the euro zone in July fell to -27, a decrease of 3.2 from June, a record low, which was far lower than the -24.9 of the market forecast.

This also means that the European Central Bank's interest rate hike is "fleeting." HSBC foreign exchange strategist Dominic Bunning believes that the European Central Bank may be difficult to tighten large -scale policies in the next few months: the window for interest rate hikes is quickly closed, no matter what the European Central Bank does, the euro zone economy is slowing.

In contrast, although European and American countries generally face inflation, the euro zone is even worse. In the context of Russia and Ukraine's conflict, European stagflation risk is much worse than the United States, which also means that the monetary policy of the European Central Bank and the Federal Reserve will continue to differentiate in the future.

The European Central Bank is still behind many central banks such as the Federal Reserve. The Fed started to raise interest rates since March. The last time I chose to raise interest rates 75 basis points. It is expected that the Fed will choose to raise interest rates 75 basis points again next week.

Lu Zhe analyzed reporters that the direction of European and American monetary policy will continue to the same direction, but the degree of tightening is still existed. The relatively good economic and demand is the confidence of the Federal Reserve's acceleration, which is an objective condition that the European Central Bank does not have.

The European Central Bank's interest rate hike also made the market recall the European debt crisis more than ten years ago. The rating of interest rate hikes in Europe is very uneven. The national bond market in the euro zone includes 19 countries. The credit levels between national bonds are large. Represents a big debt country. The last European Central Bank's interest rate hike triggered the sovereign debt crisis in the euro zone, causing it to cut interest rates three months later.

For Europe, greater challenges are obviously behind. If the supply of natural gas changes in winter, the risk of economic recession will further intensify, and the European economy may fall into a recession in the upcoming cold winter.

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