The most important events and reports on the economy, central banks and politics from the Dow Jones Newswires program
ECB ends net bond purchases and announces rate hikes
The Governing Council of the European Central Bank (ECB) has decided to end its net bond purchases and at the same time announced an increase in all key interest rates. As the ECB announced, the net purchases should end on July 1st. A first hike in key interest rates has been announced for the July meeting, and another for September, with a 50 basis point hike not being ruled out. At the same time, the ECB made it clear that it intends to hold on to its bond portfolios of EUR 4.95 trillion last acquired as part of the APP and PEPP purchase programs for a longer period of time, for which purpose it will reinvest the repayment amounts of bonds that have become due.
Lagarde: ECB ensures medium-term inflation of 2 percent
According to its President, the European Central Bank (ECB) will Christine Lagarde ensure that inflation returns to its target of 2 percent in the medium term. “High inflation is a major challenge for all of us,” Lagarde said in her press conference following the Governing Council meeting. Inflationary pressures have intensified and broadened. At the same time, the Russian invasion of Ukraine is weighing on confidence and dampening growth.
Lagarde: ECB faces series of rate hikes
According to its President Christine Lagarde, the European Central Bank (ECB) is facing a series of interest rate hikes, the form of which will depend on the development of the inflation outlook. “It’s not just one step, it’s a series of steps over the next few months,” she said at the press conference following the Governing Council meeting. How this series goes will depend on the inflation outlook. Lagarde also spoke of a “journey”.
BVR: The ECB is taking the right route
“The ECB has finally taken the right route with its signal for steady but moderate interest rate increases,” writes BVR chief economist Andreas Bley in a comment. The key interest rate must rise noticeably, at the same time the ECB must take into account the high level of economic uncertainty. “At each of the coming council meetings, a small interest rate step should follow, so the key interest rate should be increased to 0.75 percent by the end of the year,” said Bley. The foreseeable farewell to negative interest rates is a change of era, which savers will unfortunately pay dearly for due to high inflation.
IfW sees monetary policy risks unnecessarily increased
The Kiel Institute for the World Economy (IfW) criticizes the decisions of the Council of the European Central Bank (ECB). “The fact that the ECB has refrained from raising interest rates and is only announcing this for the next few months increases the monetary policy risks unnecessarily,” explains Vice President Stefan Kooths. “The announced steps are a long overdue start, but only that.” The ECB urgently needs to take further steps. Her central task is monetary stability, “and she should now devote herself exclusively to that”.
Initial US jobless claims up
The number of initial claims for US unemployment insurance benefits increased in the week ended June 4th. Compared to the previous week, the number of applications on a seasonally adjusted basis rose by 27,000 to 229,000, according to the US Department of Labor in Washington. Economists polled by Dow Jones Newswires had predicted a rise to 210,000.
Scholz: We will be better prepared for disinformation and cyber attacks
Chancellor Olaf Scholz (SPD) has announced a more determined approach to foreign disinformation campaigns on the Internet and cyber attacks. “Digital technologies are increasingly being misused as a geopolitical instrument of power, sometimes specifically for disinformation campaigns,” he said at the Internet conference Republica. Cyber attacks carried out by states and criminal organizations would also be added. “We’ll prepare better for that – that’s also a concrete consequence of the turning point,” he announced.
Wissing: Allow combustion engines with synthetic fuels to continue
Federal Transport Minister Volker Wissing (FDP) has criticized the vote by the European Parliament for an end to cars with combustion engines from 2035 and instead called for a solution with synthetic fuels that is open to all technologies. “We take our climate protection goals very seriously, which is why mobility must be made climate-neutral,” said Wissing in a statement in Berlin. “We do not agree with the decisions made yesterday in Brussels because they exclude technologies that can contribute to climate protection.”
Zelenskyy: “Fate” of Donbass will be decided in Sieverodonetsk
According to President Volodymyr Zelensky, the fate of eastern Ukraine’s Donbass region will be decided in the fiercely contested city of Sieverodonetsk. “This is a very tough, very difficult battle,” said Zelenskyj in a video message. According to Ukrainian sources, the city is now “largely” under Russian control. Selenskyj reported heavy fighting in Sievjerodonetsk. It is probably one of the most difficult battles in this war.
Bank of Canada: Rate hikes might exacerbate vulnerabilities in financial system
The Bank of Canada believes that aggressive interest rate hikes to curb historically high inflation might exacerbate existing weaknesses in Canada’s financial system. The central bank said it was unclear whether the recent decline in Canadian home sales and prices following interest rate hikes is a temporary development or the start of a significant, permanent price correction. Home prices in Canada skyrocketed by regarding 50 percent during the pandemic, leading the way in almost every developed country.
Erdogan announces renewed presidential candidacy in the coming year
Turkish President Recep Tayyip Erdogan has officially announced that he will stand once more in next year’s presidential elections. “Let me say it here. Tayyip Erdogan is the candidate of the People’s Alliance,” Erdogan said at a rally in Izmir on Thursday, referring to the alliance between his AKP party and the right-wing conservative MHP. Erdogan rejected rumors that he was aiming for an early election. The presidential election is scheduled to take place on June 24, 2023, he said.
Erdogan expects support from his allies for new offensive in Syria
According to Turkish President Recep Tayyip Erdogan, he is counting on the support of his allies for a military offensive in northern Syria. Turkey will “undoubtedly complete the missing pieces” of its “security zone” along the Turkish border, Erdogan said at a military maneuver in Izmir.
IAEA: Iran shuts down 27 cameras monitoring nuclear sites
According to the International Atomic Energy Agency (IAEA), Iran is shutting down 27 cameras monitoring nuclear facilities in the country. This measure, regarding which Tehran has informed its authorities, “poses a serious challenge to our ability to continue working there,” said IAEA boss Rafael Grossi in Vienna.
+++ economic data +++
Brazil Consumer Prices May +0.47% (Apr: +1.06%)
Brazil consumer prices 12-month rate May +11.73% (Apr: +12.13%)
DJG / DJN / AFP / apo / brb
(END) Dow Jones Newswires
June 09, 2022 1:00 PM ET (5:00 PM GMT)
