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Frederik Ducrozet Profile picture
Frederik Ducrozet
@fwred
Head of Macroeconomic Research, Pictet Wealth Management @PictetGroup. ECB Watcher. All opinions mine.
6 subscribers
Jul 1 • 12 tweets • 4 min read
🇫🇷 Is France heading to a hung parliament?
A thread with great charts and maps. 🧵 Importantly, French opinion polls have been broadly accurate once again. However, they usually fail to provide robust estimates for the second round of the legislative elections, and this time looks much more uncertain than usual.
Aug 28, 2023 • 6 tweets • 2 min read
🇪🇺 Euro area M3 money growth contracted in July, for the first time in 13 years. However, it's important to put things in perspective. 🧵 Image M3 annual growth continues to be dragged lower by the narrow money aggregate M1 which contracted by a record amount in nominal and real terms. Image
Aug 23, 2023 • 4 tweets • 1 min read
🇪🇺 Four takeaways from euro area PMIs.
1. Services sector contraction led by Germany, with early signs of labour market weakening. A sign that monetary policy transmission is working. Image 2. Early signs of stabilisation in the manufacturing sector, but external demand remains subdued. Image
May 2, 2023 • 9 tweets • 4 min read
🇪🇺 Chartstorm on euro area bank lending data (March M3, credit and Bank Lending Survey).
In short: more tightening than expected and "persistent weakening" of loan dynamics.
Likely to cement the case for a step-down to 25bp ECB rate hike(s). 🧵 Image The ECB's Bank Lending Survey was conducted between 22 March and 6 April, taking into account recent events.
Banks tightened further "substantially" their credit standards for loans to enterprises in Q1 (the largest such tightening since the sovereign debt crisis). Image
Mar 27, 2023 • 5 tweets • 2 min read
🇪🇺 Euro area money supply growth is declining faster than expected (*before* the recent events).
M1 growth, including currency and overnight deposits, contracted by a record 2.7% in February.
Credit growth remained weak overall. 🧵 In real terms, M1 growth is now down 10% YoY, consistent with a collapse in economic growth. 😱
Now given the starting point for monetary policy and money supply, the old relationships may not hold. A key focus should be on the asset side of the banks' balance sheet.
Feb 2, 2023 • 7 tweets • 3 min read
🇪🇺 Yes, the ECB is going to hike rates by 50bp today, more than the Fed.
Yes, there's room for markets to re-price the terminal rate higher, above 3.50%.
But will it be a hawkish fireworks? Not so sure. 🧵 The hawkish reality check came in December, when the ECB committed to raising rates "significantly at a steady pace to reach levels that are sufficiently restrictive". The sentence should be adjusted as the ECB gets closer to peak rates.
Dec 7, 2022 • 10 tweets • 6 min read
🇧🇪 Meet the Banque Nationale de Belgique whose shares are down 17% today after they warned against financial losses.
The BNB is a special case, being 50% privately owned. But many central bank will make large losses in coming years - a🧵on our latest note. Image Here's the @NBB_BNB_FR press release confirming the profit warning issued in September.
They expect to end 2022 with €600-800 million losses, and more importantly around €9 billion losses by 2027. This would exceed their financial buffers of €7.08bn. nbb.be/doc/ts/enterpr…
Nov 21, 2022 • 4 tweets • 1 min read
Of course it's all about signalling the ECB's determination right now, avoiding second-round effects, etc. But Lane also mentions the 2024-2025 outlook which is likely to show inflation getting back closer to 2%. The ECB should hike at a slower pace and be more forward-looking. A 50bp rate hike looks very likely at the 15 December meeting: "one platform for considering a very large hike, such as 75 basis points, is no longer there". Crucially, the hawks seem to be on the same line unless November inflation surprises massively to the upside.
Nov 14, 2022 • 18 tweets • 7 min read
🇪🇺 Are you ready for this week's main event? I'm talking about TLTRO repayments, obviously.
On Friday, the ECB will announce the amount of TLTRO borrowings that banks will repay early at the first window. A🧵on the data and implications. We once dubbed TLTROs The Last Tools Really Operational. TLTROs have played a crucial role in the transmission of monetary policy to the real economy, including during the pandemic, providing stable medium-term funding to banks under the conditions to maintain lending to SMEs.
Oct 31, 2022 • 4 tweets • 2 min read
🇨🇭 The Swiss National Bank reported a CHF142bn loss in the first nine months of this year (due to a CHF141bn loss on foreign currency positions).
2022 will see the largest annual loss on record, which in the case of the SNB can have material consequences on the fiscal stance. The SNB's record losses make it highly unlikely that the central bank will redistribute anything to the federal government and cantons.
Sep 30, 2022 • 4 tweets • 2 min read
🇪🇺 Euro area inflation hit 10% in September - first double-digit print in the history of the euro - but more importantly core inflation rose further to 4.8% (above expectations despite downside surprises in France and Spain). ECB very likely to hike by 75bp in October. 🧵 Euro area core HICP inflation rose to 4.79% in September as underlying price pressures kept broadening. Core goods inflation was up 50bp to 5.6%, but is likely to ease soon. Services inflation up by 50bp to 4.3%, which is more of a concern.
Sep 13, 2022 • 4 tweets • 2 min read
🇺🇸 Narrator: it was transitory. Image #transitory Image
Sep 8, 2022 • 4 tweets • 1 min read
This (lack of) decision means the ECB will make *losses* on its refi operations, lending TLTRO at rates below the current deposit rate while remunerating bank excess reserves at the deposit rate.
Not a big deal, but we expecting a reverse tiering after @lagarde's comments. This is because after a special period, TLTRO rates are calculated as the average deposit rate *over the life of the operation*, i.e. below the current deposit rate. Banks will now move all their excess reserves to the ECB's deposit facility to get +0.75% and lock in the spread.
Sep 8, 2022 • 4 tweets • 1 min read
🇪🇺 Historic decision: the ECB hikes policy rates by 75bp for the first time ever (*), to 0.75% for the deposit rate and 1.25% for the main refinancing rate. ECB: "This major step frontloads the transition from the prevailing highly accommodative level of policy rates towards levels that will ensure the timely return of inflation to the ECB’s 2% medium-term target."
Sep 8, 2022 • 9 tweets • 3 min read
🇪🇺 Could the ECB hike by... 100bp?
Why not hike to neutral in just one go, if that’s the appropriate stance? 🧵 We expect the ECB to hike rates by 75bp. It’s all about preserving credibility at all cost, because a failure to act would lead to more pain in the future, as per @Isabel_Schnabel's Jackson Hole speech.
Jul 21, 2022 • 9 tweets • 2 min read
ECB's press release on the TPI.
ecb.europa.eu/press/pr/date/… Asset purchases:
- not restricted ex ante
- focused on public sector
- with a remaining maturity of between one and ten years
- private sector securities "could be considered, if appropriate"
Jul 21, 2022 • 7 tweets • 2 min read
🇪🇺 ECB: last minute uncertainty. What a day to make crucial monetary policy decisions, ten years after you-know-who said you-know-what.
Today it's @Lagarde's moment. Anti-fragmentation tool: it needs to be bold, for the ECB not to be forced into large balance sheet expansion, but it can't be used to address political instability. BTP volatility may help reach unanimity to avoid a March 2020 episode.
Jun 15, 2022 • 5 tweets • 1 min read
Here it is!
Flexible PEPP reinvestments now, and tasking the relevant committees to design a new anti-fragmentation tool.
That's what markets needed to hear, finally! Yes, this is what they should have said last week. Better one week late than never. Details will matter a lot, but now I can't see how they could not deliver by the next meeting.
Jun 14, 2022 • 6 tweets • 3 min read
The speech is out!
"Monetary policy will need to respond to destabilising market dynamics. We will not tolerate changes in financing conditions that go beyond fundamental factors and that threaten monetary policy transmission." "What is important in this environment is that investors have a clear understanding that monetary policy can and should respond to a disorderly repricing of risk premia that impairs the transmission of monetary policy and poses a threat to price stability." @Isabel_Schnabel
Jun 10, 2022 • 6 tweets • 2 min read
It's pretty simple I think. If you want to prevent financial fragmentation, you need to have a plan, for the market to buy it. Interestingly, the FT article notes that "the risk of yield curve inversion could put pressure on the ECB to start shrinking its balance sheet even before the end of this year." Talking about the APP, this is a risk we've been flagging (QT).
Jun 9, 2022 • 6 tweets • 1 min read
ECB: clear commitment, less hawkish than feared:
- 25bp hike in July
- another hike in Sept: if the inflation outlook "persists or deteriorates, a larger increment will be appropriate"
- beyond Sept, a "gradual but sustained path" of further hikes will be appropriate My two cents: a smart decision.
It removes the unnecessary uncertainty over the July hike, while the commitment to "gradual but sustained" hikes beyond September provides the necessary optionality.
Our view: 25bp in July; 50bp in September; then back to benchmark 25bp pace.