European Central Bank

Decoding revisions in policy rate expectations: insights from the Survey of Monetary Analysts

10/31/2024 European Central Bank Central banks

This box analyses the revisions in policy rate path expectations observed in the Survey of Monetary Analysts (SMA) and identifies key drivers of these revisions. Amid the interest rate hikes of 2022 and 2023, financial markets and analysts made frequent and sizeable adjustments to their expectations for ECB policy rate levels. SMA participants’ macroeconomic expectations, particularly changes regarding headline inflation and GDP growth, played a significant role in shaping revisions to expectations for deposit facility rate (DFR) levels, especially during the surge in inflation.

Geopolitical fragmentation in global and euro area greenfield foreign direct investment

10/30/2024 European Central Bank Central banks

This box illustrates how aggregate greenfield foreign direct investment (FDI) flows are showing increasing signs of fragmentation along geopolitical fault lines. Euro area outward flows are following this trend, with greenfield investments increasingly tilted towards the United States and away from China. However, firms have also stepped up investment between geopolitical blocs to boost local production content in anticipation of protectionist measures or retaliatory tariffs.

Euro area fiscal position in 2024

10/30/2024 European Central Bank Central banks

This box provides an overview of fiscal developments in 2024 – as reflected in revisions in fiscal positions across rounds of Eurosystem and ECB staff macroeconomic projections. For the euro area as a whole and in groups of countries with both high and low debt ratios, the cyclically adjusted fiscal positions projected for 2024 have gradually weakened since the September 2023 projection round. Overall, fiscal positions remain weaker in the high-debt country group than in the low-debt group.

Banks lose – someone gains: Households’ unequal exposure to financial distress

10/30/2024 European Central Bank Central banks

Is the burden of distress in the banking sector shared equally among households, or is it distributed unevenly? Following the global financial crisis, the economic consequences of severe disruptions to the banking sector and the unequal impact of recessions have become a key concern of macroeconomic policy. This article examines how temporary banking sector losses affect households differently according to their income levels. The analysis reveals that low-income households bear most of the burden, while high-income households tend to be less adversely affected.

The Survey on the Access to Finance of Enterprises: monetary policy, economic and financing conditions and inflation expectations

10/29/2024 European Central Bank Central banks

The Survey on the Access to Finance of Enterprises (SAFE) provides information on the financing needs of euro area firms, their economic performance, and the availability of external funding. The article illustrates the role that the SAFE has played over the past 15 years. First, it discusses the contribution of the survey to assessing the transmission of monetary policy decisions to firms’ access to finance and their financing conditions. Second, the article shows how SAFE-based data provide timely evidence of the impact of economic crises on firms’ performance.

What consumers think is the main driver of recent inflation: changes in perceptions over time

10/29/2024 European Central Bank Central banks

Consumer perceptions of the main drivers of inflation can affect their inflation expectations and, in turn, their economic behaviour. The results of the ECB’s Consumer Expectations Survey (CES) for March 2024 reveal that most euro area consumers attribute inflation primarily to input costs, followed by profits and wages. However, the proportion of consumers identifying wages as the main driver of inflation has increased since June 2023, with this perception being most pronounced in countries experiencing significant wage growth.

Asymmetric monetary policy spillovers: the role of supply chains, credit networks and fear of floating

10/29/2024 European Central Bank Central banks

This paper examines the asymmetry in global spillovers from Fed policy across tightening versus easing episodes several examples of which have been on display since the global financial crisis (GFC). We build a dynamic general equilibrium model featuring: (i) occasionally binding collateral constraints in the financial sector with significant cross-border exposure; and (ii) global supply chains, allowing us to match the asymmetry of spillovers across contractionary versus expansionary monetary policy shocks.

Asymmetric monetary policy spillovers: the role of supply chains, credit networks and fear of floating

10/29/2024 European Central Bank Central banks

The ECB’s accountability to the European Parliament 2019-2024: commitment in times of change

10/28/2024 European Central Bank Central banks

The article examines how the ECB’s accountability practices have evolved during the ninth term of the European Parliament (2019-2024) and how these compare to previous parliamentary terms. It highlights innovations in the ECB’s accountability practices, including enhanced communication efforts and coverage of new initiatives, such as the digital euro project, which motivated extensive dialogue with the European Parliament. While focusing on central banking accountability in relation to monetary policy, it also outlines the accountability channels for ECB Banking Supervision.

Geopolitics and trade in the euro area and the United States: de-risking of import supplies?

10/27/2024 European Central Bank Central banks

Based on granular data at the product level, this paper looks at whether and how the euro area and the United States have modified their import sourcing strategies since 2016, the role played by geopolitical tensions and the potential impact on import prices. It considers two different, but not mutually exclusive, changes to sourcing strategies for a given product: (i) increasing the number of sourcing countries and (ii) reducing the import market share of the main supplier country.

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