Financial Markets Daily Report 16 December 2022
The hawkish tone of the ECB at its yesterday's meeting centered the stage in financial markets. The ECB raised official interest rates by 50bp, as expected, but noted that ongoing increases at a "steady pace" will be necessary to bring inflation back to the 2% target and announced that the QT will start in March by not reinvesting €15bn/month.
- The hawkish tone of the ECB at its yesterday's meeting centered the stage in financial markets. The ECB raised official interest rates by 50bp, as expected, but noted that ongoing increases at a "steady pace" will be necessary to bring inflation back to the 2% target and announced that the QT will start in March by not reinvesting €15bn/month.
- The ECB also updated its macroeconomic projections, where euro area GDP is expected to contract in Q4 and Q1, yielding a 0.5% growth for 2023, and inflation is not forecasted to reach 2% until 2025 year-end, averaging 6.3% in 2023. Yesterday, the central banks of UK and Switzerland also raised rates by 50bp and in Norway by 25bp.
- In this context, sovereign yields rose markedly in the euro area, affected both by the QT announcement and the revision of expectations for ECB official interest rates in the coming quarters. Equities declined notably across the board.
- Today the focus will be on December flash PMI for the main advanced economies.