November 2022

Post n°292

How well have ECB rate hikes been transmitted to the money market?

Published on 11/25/2022

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By Benoit Nguyen and Miklos Vari

Since July, the ECB increased its key interest rates by 200 basis points in total (once by 50bps and twice by 75 bps). These are the largest single rate hikes of the ECB key interest rates. In this post, we examine to what extent these changes of policy rates passed through to the money market, the first step of monetary policy transmission. Transmission has been nearly complete in the unsecured market (e.g. on €STR) but subdued in the secured market (i.e. on repo transactions).

Graph 1: Changes for unsecured money market rates from July to November 2022
Graph 1: Changes for unsecured money market rates from July to November 2022 Source: ECB, Statistical Data Warehouse. Note: DFR stands for Deposit Facility Rate.
Updated on 11/25/2022 08:58
Post n°291

Sustainability-linked bonds, an effective tool for decarbonisation?

Published on 11/18/2022

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By Pauline Bacos and Naelle Verniest

Sustainability-linked bonds (SLBs) have an innovative format that links the bond’s coupon to the achievement of environmental, social or governance targets. Many SLBs now include targets for reducing greenhouse gas emissions. However, this mechanism must impose greater constraints on issuers in order to become a real decarbonisation tool.

Chart 1: Mechanisms of SLBs
Chart 1: Mechanisms of SLBs Source: Banque de France. Note: A step-up is a coupon increase applied if an environmental, social and governance (ESG) target is not achieved. A step-down is a coupon decrease applied if an ESG target is achieved. These mechanisms are defined at issuance
Updated on 11/18/2022 16:55
Post n°290

The pass-through of commodity prices to inflation in Africa

Published on 11/10/2022

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By Thibault Lemaire and Paul Vertier

The rise in world commodity prices since mid-2020 has fuelled inflation in Africa. A new estimation strategy shows a pass-through of about 30% from commodity prices to consumer prices on the continent, which is higher than existing estimates. The impact is greater in low-income countries and in those countries where the food share in the consumption basket is the largest.

Chart 1: Impact of a 1% rise in commodity prices on consumer prices in Africa
Chart 1: Impact of a 1% rise in commodity prices on consumer prices in Africa Source: Authors’ calculations based on the local projection method. Data from the World Bank, International Monetary Fund (IMF), International Disaster Database (EM-DAT), and Armed Conflict Location and Event Data Project (ACLED).
Updated on 11/10/2022 16:59
Post n°289

Paris maintains its rankings in FX and rate derivatives markets

Published on 11/04/2022

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By Amélie Robinette

In 2022, the Paris marketplace maintained its rankings in global foreign exchange and over-the-counter interest rate derivatives markets. Activity volumes in Paris have risen sharply over the past three years, driven by strong internationalisation and aided by growing digitalisation.

Table 1: France ranks 7th globally in the FX market and 5th in the interest rate derivatives market
Table 1: France ranks 7th globally in the FX market and 5th in the interest rate derivatives market Source: Banque de France for France, BIS for world data. Note: Daily volume of activity in the main financial centres (USD billions, at current exchange rates), gross data adjusted for domestic double counting.
Updated on 11/04/2022 08:46