Today's ECB meeting was very relevant.

Not because of the 75 bps hike, but because ECB members deliberately chose to keep excess liquidity elevated.

And this policy response matters for the EUR amidst the energy crisis.

A thread.

1/

— Alf (@MacroAlf) September 8, 2022

In 2020-2021, European banks borrowed more than EUR 2 trillion (!) from the ECB via the so-called TLTRO operations.

The borrowing conditions were extremely advantageous with interest rates as low as -1% for the Jun20-Jun22 period.

3/ pic.twitter.com/9iimrojllb

— Alf (@MacroAlf) September 8, 2022

The funding costs will remain low: they were locked for Jun20-Jun22 at -1% for basically all banks, and going forward they will be equivalent to the average ECB depo rate between Jun22 and the maturity of the TLTRO loan.

Looking at market-implied forwards…

5/

— Alf (@MacroAlf) September 8, 2022

With such an incentive schemes, it’s very likely European banks won’t be repaying these loans. There was also no mention of QT discussions at all.

This means the ECB balance sheet won’t shrink, and EUR excess liquidity won’t be coming down anytime soon.

8/ pic.twitter.com/ppEdyDMJxJ

— Alf (@MacroAlf) September 8, 2022

Running up govt debts is becoming more and more expensive. German 10y yields jump to 1.79%, trade near 8y high. pic.twitter.com/YsljVBaT3r

— Holger Zschaepitz (@Schuldensuehner) September 9, 2022

#France de #Macron et #AvecMacron @EmmanuelMacron @BrunoLeMaire #Industrie

Le déclin de la Production Industrielle Française 😱😱😱
Et pour l’instant, les sanctions suicidaires contre la #Russie , avec les coûts #Energie , ne sont pas encore perceptibles dans ces chiffres. pic.twitter.com/UnPaPXeK1j

— JDrake (@JDrake45902915) September 9, 2022

#France de #Macron et #AvecMacron @BrunoLeMaire @EmmanuelMacron

Données mensuelles du Commerce Extérieur en Biens avec la #Russie
À ce niveau, la prescience de ceux qui nous gouvernent confine au génie 😂🤣 pic.twitter.com/jjMUN8hDrP

— JDrake (@JDrake45902915) September 9, 2022