MyStratWeekly – September 19th 2023

Topic of the week: ECB: one last hike

• The ECB raised its rates by 25 bps due to inflation expected to remain “too high for too long”;
• The important point comes from the change in communication suggesting that this increase is probably the last;
• The ECB should opt for an extended status quo until mid-2024;
• At the same time, monetary policy will become more restrictive through the end of reinvestments of reimbursement under the APP and TLTRO reimbursements;
• The objective is to firmly anchor inflation expectations.

Market review: The ECB had no choice

• ECB raises deposit rates to 4%;
• ECB cuts growth forecasts amid sticky inflation;
• The Fed may tighten policy further;
• Higher yields having little impact on risky assets.

Axel Botte's and Aline Goupil-Raguénès' podcast

• Topic of the Week: Oil Market;
• Theme: A final rate hike.

Chart of the week

The euro depreciated towards $1.06 despite the ECB's 25 bp rate hike. The weakness of economic surveys in the eurozone and the significant growth gap with the United States are contributing to the decline of the single currency.

In addition, the rebound in oil, and more generally in imported raw materials, is deteriorating the eurozone's terms of trade. In 2022, the surge in gas had reduced the euro below parity.