The key interest rates of the central banks continue to rise – not as sharply as in the course of the year so far, but the interest rate increases could continue further into the future than many experts had previously assumed.
Gerald Braunberger
Editor.
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The European Central Bank surprised numerous observers on Thursday with its emphasis on continued significant inflation risks.
The ECB expects the inflation rate in the euro zone to fall from 8.4 percent this year to 6.3 percent next year.
But if the necessarily very uncertain forecasts for the following years of 3.4 percent for 2024 and 2.3 percent for 2025 come true, it will still take some time for the inflation rate to reach its medium-term target of 2 percent again.
Monetary policy cannot yet signal the all-clear;
this finding applies not only to the euro zone, but also to other countries and currency areas.
The interest rate forecasts are therefore being adjusted in the financial institutions.
For the ECB, Commerzbank expects the deposit rate to rise from 2 percent to 3.25 percent by next spring.
In the United States, interest rates could rise to between 5 and 5.25 percent in the coming year.
Reference to forthcoming charges
Rising key interest rates affect the entire economy via the financial sector - but they also affect the central banks themselves. In recent months, several central banks have reported losses or pointed to impending strains.
The Swiss central bank suffered a loss of CHF 142.4 billion for the first nine months of the current year.
The Central Bank of Australia announced a book loss of AUD 36.7 billion for the current year, which more than eroded equity and resulted in negative equity of AUD 12.4 billion.
A private company would be over-indebted with negative equity, but does this also apply to central banks?
Australian Governor Philip Lowe said reassuringly: "This negative equity does not affect the bank's operations, nor does it limit its efficiency or its ability to conduct monetary policy."
But since the topic of central bank losses, which is not commonplace even though it has been discussed for a long time in specialist circles, offers material for dramatization and, of course, murmuring voices can also be heard in the German financial scene warning of the presumably dire consequences of central bank losses in the eurozone, it seems appropriate to analyze this complex soberly.
A first question is: Where do central banks, whose business purpose is not profit maximization, but which mostly generate profits, come from, possibly reaching the point of depleting reserves?
Apart from a few exceptions, the reason for this lies in overcoming a long phase of low interest rates in connection with the central banks' balance sheets, which have grown significantly as a result of securities purchase programs and credit expansion to commercial banks.
In these balance sheets, purchases of securities and lending to commercial banks on the assets side are offset by deposits from commercial banks (and a generally small position in equity) on the liabilities side.
This is because when a central bank buys bonds from banks or lends to commercial banks, it credits the amounts to the commercial banks on their deposit accounts held with the central bank.