The ECB warns of ‘happiness’ in the home, the bonds of secrecy and crypto

Increased “excitement” in real estate markets, bonds and crypto currencies has created a risk that will be revealed if rising prices bring high interest rates, The European Central Bank has warned.

This year the economic growth of the eurozone from the coronavirus has reduced short-term economic risks, but it has also led to a crisis. increasing long-term risk, The ECB said Wednesday in its bi-annual economic stability review.

“The main concerns are related to debt consolidation schemes, financial and housing markets and debt consolidation in businesses and government agencies,” the ECB said.

Rising inflation and lower interest rates have led investors to take greater risks in search of yields, which have left the stock market, credit and crypto asset “increasingly restructuring”, it warned.

“Market volatility may be triggered by a slower pace than expected, an ever-increasing economic slowdown, an increase in stress in non-financial institutions or a sudden change in market expectations for the economy. Process normalization,” he said.

Lower Eurozone prices he leaves to 13 years high of 4.1 percent in October – above the ECB targets of 2 percent. Big bank, however he predicted rising prices will fall below expectations in the next few years and he said he does not expect to raise prices next year.

But it also said Wednesday that there was “a risk that the recent global crisis and rising electricity prices could have long-lasting effects on inflation beyond expectations”.

EU housing prices rose 7.3 percent annually in the second quarter, the fastest rise since the 2008 financial crisis. The ECB said there were “increasing signs of exacerbation” that left many Europeans home markets “Lovers of interest” and a warning of “damage to lending standards.”

It said that this “strengthened the case” for state officials to establish “major policies”, such as limits on bank lending or higher interest rates on mortgages.

The ECB said that “foreign exchange segments, such as cryptoasset markets, also remain volatile.” It also highlighted the impact of connectivity between the financial markets and stablecoins, a type of cryptocurrency that is nominally based on underlying assets to reduce price volatility.

Rapid growth in size and use stablecoins “Call for the speedy implementation of management, monitoring and evaluation systems,” it said.

The ECB says non-banking organizations “continue to face credit risk” due to the increasing number of “junk bond” businesses listed below. It added: “If yields soared, price losses could lead to inflation which, when combined with low income – could force the bond money to cut assets to be redeemed.”

The central bank said its monetary policy was lax, while reducing interest rates in the wrong places and buying billions of bonds, added “incentives to take risks that could increase and lead to construction. – increasing systemic risk”.

However, it argued that the main tools for combating these risks are macroprudential laws rather than “wind-based” measures to strengthen monetary policy more than is necessary to achieve its inflation target.

Earlier this month, a The US Federal Reserve warns The emphasis on China’s economic sector, which has come as a result of the financial crisis in the heavily indebted Evergrande group, “posed a threat to the US economy”. But the ECB eased the situation, saying: “Meanwhile, global economic growth and economic downturns have diminished, because external exposure seems to be declining.”