Apparently, the European Central Bank (ECB) balance sheet was meant to shrink significantly in 2019. It has shrunk just 0.5% in 2019 until July 5th (as against 5% for the Federal Reserve in the same period).
At 4.67 trillion Euros (or around 41% of Euro area or Eurozone GDP), it doesn’t look like things are going to change quickly.
The Governing Council of the European Central Bank (ECB) expects the key ECB interest rates to remain at their present levels at least through the end of 2019.
The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility are 0.00%, 0.25% and -0.40% respectively and these rates are expected to remain in place at least until the end of 2019.
Sweden’s Central Bank, the Riksbank raised interest rates for the first time in seven years on Thursday which might cause further European monetary tightening. Riksbank’s benchmark repo rate was raised 25 bps from -0.5% earlier to -0.25%. It still remains negative though.
The European Central Bank (ECB) only started its Quantitative Easing (or QE) program in March 2015 in order to fight ultralow inflation in the Eurozone (also called the Euro Area). It somewhat worked by weakening the Euro (€), increasing exports, giving the stock market a boost and drastically lowering financing costs for European governments and corporations. This caused the ECB balance sheet to soar over €4.5 trillion or 45% of Eurozone GDP.
Central Banks have grown their balance sheets significantly in the past 20 years and almost exponentially since the 2008 financial crisis. Here’s how much the balance sheets of the Bank of Japan, the Swiss National Bank, the Federal Reserve and the European Central Bank have grown in the 21st century,
Bank of Japan
Total assets: 540.8036 trillion Yen (JPY) = 4.93 trillion US Dollars (USD)
As of date: May 1, 2018
Asset size as percentage of GDP: 101% of GDP
Interesting information: The Bank of Japan has a target to buy 6 trillion Yen ($54 billion) worth of exchange traded funds a year. It now holds almost 82% of all ETFs in Japan and is indirectly the largest shareholder in many large Japanese companies, almost about half of listed companies in Japan.
The European Central Bank (ECB) announced on Wednesday that it will halve its bond buys to 15 billion Euros (from the current 30 billion Euros) a month from October then shut the programme at the end of the year.
ECB’s balance sheet has increased by 2 trillion Euros since 2015 when it announced its bond buying programme. 2-year yields for most of the Eurozone countries are currently negative and 10-year yields in most cases are lower than that of the United States. The European Central Bank (ECB) is by far the biggest holder of European bonds and the biggest (almost 90%) buyer of the weaker Eurozone (Italy, Spain, Portugal and Greece) countries debt since 2015. The ECB balance sheet is now over 4.5 trillion Euros, some 45% of Eurozone GDP.
The US, the UK, France and Spain all reported GDP numbers over the last week.
US real GDP increased at an annual rate of 2.3% in the first quarter of 2018 as per an advance estimate released by the Bureau of Economic Analysis. Read more about it here.
Personal consumption collapsed, with vehicle sale falling significantly. Business inventories were up significantly too. Total employee compensation (which includes wages and benefits) rose 2.7% over past 12 months, up from 2.4% a year ago and the highest since Q3 2008, while the household savings rate fell to a multi-year low of 3.1%.
Parts of the European Union have seen GDP per capita shrink between 2007 and 2017 and the overall compounded annual growth rate for the European Union was just 1.2%
GDP growth for the European Union between 2007 and 2017 adjusted for inflation was negative
Banks in Greece, Cyprus, Portugal and Italy have a non-performing loan ratio of over 10% a decade on from the financial crisis and have only provisioned around 50% of the losses
The European Central Bank (ECB) is by far the biggest holder of European bonds and has a balance sheet of €4.5 trillion or some 45% of the GDP of the Eurozone
18 of the 28 countries that are part of the European Union have seen house prices fall between 2008 and 2017
Greece has been the worst affected country, with its stock market down 85% since 2007, GDP per capita down 22% since 2007, house prices down 43% since 2008 and banks in Greece currently have a non-performing loan ratio of 42%
Eurozone Debt as % of GDP is gradually falling but is still historically high
Since the financial crisis of 2008, economic uncertainty has seen falling fertility rates for the European Union with population now set to fall over the coming decades