European Central Bank

US trade policies and the activity of US multinational enterprises in the euro area

06/20/2025 European Central Bank Central banks

This box provides an overview of how US multinational enterprises (MNEs) shape euro area trade patterns. It focuses particularly on trade with the United States in the light of ongoing trade tensions and their potential impact. MNEs based in the United States contribute substantially to euro area economic activity. In particular, these companies shape euro area trade in goods with the United States via substantial exports of pharmaceutical products, intragroup trade and contract manufacturing.

Advancing the capital markets union in Europe: a roadmap for harmonising securities post-trading

06/20/2025 European Central Bank Central banks

Harmonising European post-trade activities is essential for bolstering capital markets and better serving European citizens and companies. Progress is required in both enhancing the current landscape and developing digital solutions. This article concentrates on the present post-trade environment, with a particular focus on non-harmonised elements, particularly in securities settlement, collateral management and asset servicing.

The transmission of monetary policy: from mortgage rates to consumption

06/18/2025 European Central Bank Central banks

This article analyses the transmission of monetary policy to consumption via its impact on mortgage payments. Simulations using the current distribution of loans across households show that, despite rate cuts, a substantial part of past tightening is still in the pipeline. The average interest rate on outstanding mortgages is expected to continue to increase, translating into a persistent drag on the expected consumption recovery.

US financial conditions and their link to economic activity: the role of equity valuations

06/17/2025 European Central Bank Central banks

This box explores whether the effect of tightening financial conditions on US economic growth varies depending on the level of equity valuations. Financial conditions indices (FCIs) offer a consolidated measure of the costs of financing for households, firms and governments and typically incorporate interest rates, equity prices, corporate bond spreads and exchange rates. Using an exemplary FCI, we find that equity prices significantly influence US financial conditions when equity markets are overvalued. That, however, is shown to weaken their economic growth signal.

Determinants of inflation expectations of firms in the SAFE

06/16/2025 European Central Bank Central banks

This box explores the factors shaping the euro area inflation expectations of firms in the survey on the access to finance of enterprises (SAFE). It finds that the short-term inflation expectations of firms are more volatile and closely tied to current inflation trends compared with their medium-term and long-term expectations. The determinants of these expectations considered in the analysis include the individual characteristics of firms, the sectors these operate in, their country of operation, their anticipated business decisions and euro area inflation.

Financial market volatility and economic policy uncertainty: bridging the gap

06/16/2025 European Central Bank Central banks

This box explores the relationship between financial market volatility and economic policy uncertainty (EPU). Historically, financial market volatility and news-based measures of EPU have displayed close co-movement, albeit diverging at times and across countries. More recently, the rise in euro area EPU has reflected an intensification of an upward trend observed over a number of years, largely driven by developments in Germany.

A new model to forecast energy inflation in the euro area

06/12/2025 European Central Bank Central banks

Energy inflation is a major source of headline inflation volatility and forecast errors, therefore it is critical to model it accurately. This paper introduces a novel suite of Bayesian VAR models for euro area HICP energy inflation, which adopts a granular, bottom-up approach – disaggregating energy into subcomponents, such as fuels, gas, and electricity. The suite incorporates key features for energy prices: stochastic volatility, outlier correction, high-frequency indicators, and pre-tax price modelling.

A new model to forecast energy inflation in the euro area

06/12/2025 European Central Bank Central banks

Organized crime and banks: assessing the effects of anti-mafia police actions on lending

06/11/2025 European Central Bank Central banks

This study examines how dismantling Mafia-connected firms affects banks’ lending practices. Using a unique dataset of 667 such firms and loan-level data from the European Central Bank, our analysis shows that anti-Mafia operations precede an increase in bank loans to businesses that operate in areas that are directly affected by these actions. Specifically, overall loan volumes increase by approximately 0.8 percent, which translates to an increase of €1.38 billion in bank loans to these firms.

From losses to buffer - calibrating the positive neutral CCyB rate in the euro area

06/11/2025 European Central Bank Central banks

We study the impact of cyclical systemic risks on banks’ profitability in the euro area within a panel quantile regression model, with the ultimate goal to inform the calibration of the Countercyclical Capital buffer (CCyB). Compared to previous studies, we augment our model to control for unobserved bank-specific characteristics and year-fixed effects and find a lower degree of heterogeneity in the estimated effects across the conditional distribution of bank returns on assets.

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