Investment Institute
Punto de vista: Economista Jefe

Plumbing issues

  • 24 Octubre 2022 (7 min de lectura)

  • As the ECB will likely hike by 75 bps this week, focus is on how the central bank deals with excess reserves, with significant ramifications for fiscal policy and financial stability.
  • With Boris Johnson out of the leadership race, the shift to prudent fiscal policy is irreversible in the UK in our view

We assume most of our readers ordinarily don’t spend much time thinking about their house plumbing, but we also know from experience that when a plumbing issue emerges it becomes difficult to think about anything else until it is resolved. The European financial system may well be facing one of those “plumbing issues”. While this week’s ECB Governing Council meeting is ostensibly about delivering another hike – we expect 75 basis points, in line with consensus – they may also address their nagging excess reserves problem. As obscurely technical as it may seem, this is major, since remunerating those reserves at a growing deposit rate entails a significant cost to the central bank…and ultimately the governments’ coffers, at a time when the fiscal space is narrowing.

The ramifications for liquidity are not straightforward: while “encouraging” the early unwinding of TLTROs – one of the available levers to diminish excess reserves - would set free a significant amount of bonds at a time of collateral scarcity, moving too fast on Quantitative Tightening would add to already challenging conditions on the bond market. We expect the ECB to choose prudence on the latter and postpone decisions. Yet, we continue to be concerned with the speed at which monetary policy is tightening everywhere, which mechanically raises the risk of financial stability accidents.

The UK has been a source of global stress lately. The market reaction last Friday upon news that a significant number of MPs were ready to back a return of former PM Boris Johnson signalled a preference by investors for a fiscally prudent brand of conservatism which Johnson would have had difficulty embodying, even if he would probably have kept Jeremy Hunt as Chancellor had he won. With Johnson out of the race on Sunday night, the new fiscally prudent stance is solidified, whoever from the two remaining candidates – Rishi Sunak, now the clear favourite, or Penny Mordaunt – wins. They both supported Brexit, but we maintain the view we held last week: with a diminished capacity to steer a lone macroeconomic course, some gradual improvement in the relationship with the EU is now the only workable option.  

Descargue el informe completo
Descargar informe (507.53 KB)

Artículos relacionados

Punto de vista: Economista Jefe

Draghi Captures the Zeitgeist

Punto de vista: Economista Jefe

Zoom on the Boom

Punto de vista: Economista Jefe

Postcard from Davos


    This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

    It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date.

    All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document.

    Furthermore, due to the subjective nature of these opinions and analysis, these data, projections, forecasts, anticipations, hypothesis, etc. are not necessary used or followed by AXA IM’s portfolio management teams or its affiliates, who may act based on their own opinions. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited.

    Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 22 Bishopsgate London EC2N 4BQ

    In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

    Advertencia sobre riesgos

    El valor de las inversiones y las rentas derivadas de ellas pueden disminuir o aumentar y es posible que los inversores no recuperen la cantidad invertida originalmente.

    Volver arriba
    Clientes Profesionales

    El sitio web de AXA INVESTMENT MANAGERS Paris Sucursal en España está destinado exclusivamente a clientes profesionales tal y como son Definidos en la Directiva 2014/65/EU (directiva sobre Mercados de Instrumentos financieros) y en los artículos 194 y 196 de la Ley 6/2023, de 17 de marzo, de los Mercados de Valores y de los Servicios de Inversión. Para una mayor información sobre la disponibilidad de los fondos AXA IM, por favor consulte con su asesor financiero o diríjase a la página web de la CNMV

    Por la presente confirmo que soy un inversor profesional en el sentido de la legislación aplicable.

    Entiendo que la información proporcionada tiene únicamente fines informativos y no constituye una solicitud ni un asesoramiento de inversión.

    Confirmo que poseo los conocimientos, experiencia y aptitudes necesarios en materia de inversión, y que comprendo los riesgos asociados a los productos de inversión, tal como se definen en las normas aplicables en mi jurisdicción.