EU Market Update - 15/09/21

Russia Raises Rates to Curb Inflation Ahead of Parliamentary Election

  • Russia’s central bank raised interest rates for the fifth time in a row on Friday, key interest rate by 25 basis points to 6.75 per cent
  • This indicates it might hike further to curb surging prices and food costs that are pushing up inflation in many emerging markets, addressing what has become a major issue ahead of parliamentary elections later this month that are marked by soaring food prices and slumping real incomes
  • Overall a worrying outlook, as rising prices are becoming an increasing concern across many emerging markets

ECB to Slow Bond-Buying as Europe’s Economy Improves

  • After a two-day meeting of its governing council, the ECB has decided to move to a moderately lower pace in its €1.85tn pandemic emergency purchase programme (PEPP) from the €80bn-a-month level it has run at since March
  • This shows how the decision to slow the PEPP, the ECB’s flagship policy response to the pandemic, follows a strong rebound in eurozone growth and inflation, as rising coronavirus vaccinations have helped to end lockdowns and boosted business and household activity
  • Overall, an improving outlook, as European Central Bank president Christine Lagarde reassured bond investors even as the ECB said it would buy fewer bonds in a sign of confidence in the eurozone’s economic recovery

Brussels to Issue ‘COVID Green Bonds’ as Part of Pandemic Recovery Effort

  • Brussels is to issue its first Covid-19 green bond as part of its efforts to become the world’s biggest issuer of sustainable debt
  • This shows how the European Commission plans to tap into debt markets for a sale of green bonds in October, raising funds for environmentally friendly reforms and investment in EU member states, as part of the union’s pandemic recovery effort
  • Overall, a promising development, as the global green bonds market has boomed in recent months, with total issuance in the asset class topping $200bn this year