Inflation expectations matter more than unemployment

2021 ◽  
Keyword(s):  
Euro Area ◽  
Central Banks ◽  
Inflation Expectations ◽  
Trade Off ◽  
Content Type

Significance The surge in inflation this year owes more to supply bottlenecks caused by the release of pent-up demand than to falling unemployment. In the decade before the pandemic, US unemployment more than halved and euro-area unemployment nearly halved, but inflation remained below target in both economic areas. Impacts Central banks face the dilemma of raising rates too early for growth and too late for inflation, and may struggle to dampen expectations. The threat of a possible revival of the pandemic will help temporarily to cool inflation expectations that have surged in 2021. The trade-off between unemployment and inflation that has been missing for many years may emerge again once the pandemic is finally over.

Tighter global money risks exposing banks’ fault lines

2019 ◽  
Keyword(s):  
Interest Rates ◽  
Euro Area ◽  
Financial Services ◽  
Stress Test ◽  
The United States ◽  
Central Banks ◽  
Mortgage Lending ◽  
Stress Tests ◽  
Content Type ◽  
Credit Cycle

Significance Addressing the concerns this raises for banks' profitability, the Financial Services Agency announced that it would stress test Japan's 105 regional banks in mid-2019. Central banks in Japan, the euro area, Sweden, Denmark and Switzerland have cut their policy rates more aggressively than other countries since the 2008-09 financial crisis. Authorities have done this to spur banks to lend more, but in doing so have increased banks' risk-taking. Impacts Central banks with policy rates close to zero or negative will require higher countercyclical buffers from banks failing stress tests. In Japan, banks will be highly exposed to asset price fluctuations when the BoJ winds down QE. The BoJ holds a large amount of US collateralised loan obligations, exposing it to a credit cycle downturn in the United States. The less efficient euro-area banks and high-deposit banks involved in syndicated loans will be most at risk when interest rates rise. Danish, Swedish and Swiss banks are vulnerable to higher rates and a property crash because of their large mortgage lending portfolios.

Dollar will remain the main global reserve currency

2015 ◽  
Keyword(s):  
Exchange Rate ◽  
Euro Area ◽  
Central Banks ◽  
Reserve Currency ◽  
Foreign Reserves ◽  
Content Type ◽  
Short Run ◽  
Political Uncertainties

Subject Composition of central banks' foreign reserves. Significance The dollar's share of foreign reserves held by central banks has risen from 60.8% in the second quarter of 2014 to 63.8% in the second quarter of 2015, according to the latest IMF data. One has to go back nearly ten years, to calendar 2005, to find such gains and even then the dollar's share increased by 1.4%, less than half the 3.0% increase in the four quarters since mid-2014. Impacts Exchange rate variations will drive the dollar's share of global foreign reserves in the short run. In the longer term, a freer floating renminbi could reduce China's use of the dollar as a reserve currency. A rekindling of political uncertainties in the euro-area could lead to a reduction in the euro's role as reserve currency.

Pressure rises on Hungary’s central bank to hike rates

2018 ◽  
Keyword(s):  
Central Europe ◽  
Euro Area ◽  
Emerging Market ◽  
Central Banks ◽  
Monetary Policies ◽  
Content Type ◽  
Services Sector ◽  
Financial Conditions ◽  
Bond Funds ◽  
Trade War

Significance The long-anticipated change in ECB policy is contributing to the recent tightening in financial conditions. The credibility of central banks in Central Europe (CE), where monetary policies are closely aligned with those of the ECB, is being tested. Impacts The euro-area economy will decelerate, judging by a flash PMI survey, as an export-led slowdown broadens out to the services sector. The Fed is on track to raise rates for the fourth time this year in December, despite a severe stock market sell-off and trade war fears. Tighter conditions could further reduce this year’s weaker inflows into emerging market equity and bond funds, about one-fifth down on 2017.

Volatility undercuts bitcoin’s effort to go mainstream

2021 ◽  
Keyword(s):  
Market Structure ◽  
Euro Area ◽  
Market Price ◽  
Central Banks ◽  
Equity Market ◽  
Bond Yields ◽  
Fiscal Stimulus ◽  
Content Type ◽  
Bubble Bursting ◽  
Dot Com

Significance Bitcoin is benefiting from the growing institutionalisation of the investor base for digital tokens, and the appeal of crypto-assets as a hedge against the debasement of currencies by money-printing central banks. Having reached an all-time high of USD41,823 on January 8, bitcoin, the world’s most widely traded cryptocurrency, has since lost nearly 20%. Impacts Wild price swings and the lack of a central market structure will limit bitcoin’s ability to challenge gold as a hedge against inflation. The S&P 500 equity market price-to-earnings ratio is near its highest since the 2000 dot-com crash, raising fears of the bubble bursting. The prospect of more aggressive US fiscal stimulus is driving a sell-off in treasuries, raising fears of a disorderly rise in bond yields. Europe’s COVID-19 resurgence raises the prospect of more stimulus, but also the scope for more tension about this among euro-area states.

scholarly journals TARGET2 imbalances: causes, assessments and consequences

2020 ◽  
Vol 15 (1) ◽  
pp. 107-117
Author(s):  
Michael Menrad
Keyword(s):  
Central Bank ◽  
Euro Area ◽  
Central Banks ◽  
Inflation Expectations ◽  
Problem Solution ◽  
Quantitative Easing ◽  
Government Bonds ◽  
European Central ◽  
Critical Situation ◽  
Market Intervention

This research aims to enrich the literature on the threatening topic of Target2 imbalances in the euro area. Using a quantitative time series analysis, the paper examines and discusses the development of Target2 imbalances and the interrelationships of the European Central Bank (ECB) activities through market intervention using quantitative easing. This paper outlines the scope of central bank activities in different Eurozone countries and examines how individual debtor and creditor countries, as well as central banks, will continue to operate. In this context it examines whether the ECB is working on a problem solution, and what are the risks posed by Target2 imbalances for the euro area, as well as whether the euro is volatile and how the Target2 imbalances will be managed if the euro breaks. This research highlights the ambiguity of central bank activities, explains the burdens and risks of Germany as the largest creditor, shows solutions through the communitization or the creation of Target3 to correct past mistakes and to prevent a further and more severe global crisis. Attention is drawn to the fact that Italy could put the Eurozone in a critical situation by introducing mini-BOTs (small government bonds; “titoli di Stato di piccolo taglio”) as the second currency. Furthermore, it is pointed out that the ECB has adjusted its price stability objectives to raise inflation expectations in the Eurozone, which is unlikely to satisfy Target2 demanding countries.

Central Banks and Their Banknote Series: The Efficiency-Cost Trade-Off

2010 ◽  
Author(s):  
Yassine Bouhdaoui ◽  
David Bounie ◽  
Leo Van Hove
Keyword(s):  
Central Banks ◽  
Trade Off ◽  
Efficiency Cost

Heterogeneous investors and trading platforms competition

2015 ◽  
Vol 16 (3) ◽  
pp. 303-320 ◽  
Author(s):  
Nathalie Oriol ◽  
Alexandra Rufini ◽  
Dominique Torre
Keyword(s):  
Design Methodology ◽  
Network Externalities ◽  
International Competitiveness ◽  
Foreign Market ◽  
International Competition ◽  
European Market ◽  
Financial Instruments ◽  
International Context ◽  
Trade Off ◽  
Content Type

Purpose – The purpose of this paper is to consider competition’s issues between European market firms, such as Euronext, and multilateral trading facilities, following Markets in Financial Instruments Directive’s enforcement. This new domestic competition is adding to the existing international competition among financial centers. While diversification of local trading services can improve the international competitiveness of a financial center, the fragmentation of order flows can harm its attractiveness. Design/methodology/approach – The theoretical setting analyzes the interaction between heterogeneous who experiment network externalities, and heterogeneous local trading services providers (alternative platforms and incumbent) in an international context. The authors compare two forms of organizations of the market: a consolidated market, and a fragmented market with alternative platforms – in both cases, in competition with a foreign universe. Findings – The results of this study point out the importance of the trade-off between diversification and externalities. With alternative platforms entry, enhanced competition decreases fees and redistributes informed investors between the foreign market and the domestic one. The increase of domestic platforms’ number then has more complex effects on externalities (of information and liquidity). When the liquidity externalities are low, the diversification of financial platforms increases the number of investors on domestic centers. When liquidity externalities are not negligible, despite the decrease of fees, this same diversification orientates more informed investors to the foreign center. Originality/value – This model is the first to analyze jointly the internal and international competition of trading platforms with heterogeneous investors.

scholarly journals Interplay between Antibiotic Efficacy and Drug-Induced Lysis Underlies Enhanced Biofilm Formation at Subinhibitory Drug Concentrations

2017 ◽  
Vol 62 (1) ◽  
Author(s):  
Wen Yu ◽  
Kelsey M. Hallinen ◽  
Kevin B. Wood
Keyword(s):  
Cell Wall ◽  
Biofilm Formation ◽  
Cell Lysis ◽  
Living Cells ◽  
Cell Wall Synthesis ◽  
Drug Induced ◽  
Trade Off ◽  
Content Type ◽  
Subinhibitory Concentrations ◽  
Antibiotic Efficacy

ABSTRACTSubinhibitory concentrations of antibiotics have been shown to enhance biofilm formation in multiple bacterial species. While antibiotic exposure has been associated with modulated expression of many biofilm-related genes, the mechanisms of drug-induced biofilm formation remain a focus of ongoing research efforts and may vary significantly across species. In this work, we investigate antibiotic-induced biofilm formation inEnterococcus faecalis, a leading cause of nosocomial infections. We show that biofilm formation is enhanced by subinhibitory concentrations of cell wall synthesis inhibitors but not by inhibitors of protein, DNA, folic acid, or RNA synthesis. Furthermore, enhanced biofilm is associated with increased cell lysis, increases in extracellular DNA (eDNA) levels, and increases in the density of living cells in the biofilm. In addition, we observe similar enhancement of biofilm formation when cells are treated with nonantibiotic surfactants that induce cell lysis. These findings suggest that antibiotic-induced biofilm formation is governed by a trade-off between drug toxicity and the beneficial effects of cell lysis. To understand this trade-off, we developed a simple mathematical model that predicts changes in antibiotic-induced biofilm formation due to external perturbations, and we verified these predictions experimentally. Specifically, we demonstrate that perturbations that reduce eDNA (DNase treatment) or decrease the number of living cells in the planktonic phase (a second antibiotic) decrease biofilm induction, while chemical inhibitors of cell lysis increase relative biofilm induction and shift the peak to higher antibiotic concentrations. Overall, our results offer experimental evidence linking cell wall synthesis inhibitors, cell lysis, increased eDNA levels, and biofilm formation inE. faecaliswhile also providing a predictive quantitative model that sheds light on the interplay between cell lysis and antibiotic efficacy in developing biofilms.

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