Report
Excess liquidity persists
In the United States (despite quantitative tightening) and the euro zone (despite quantitative tightening and the gradual disappearance of long-term repos), liquidity remains extremely abundant. This excess liquidity explains the abnormally low level of long-term interest rates and the abnormally high level of stock market indices. The Federal Reserve has stated that it will stop quantitative tightening at a point where bank reserves are still "ample". On the contrary, the ECB is talking about the possibility of stepping up the pace of quantitative tightening. The key question is whether the reduction in the size of the balance sheets of the two central banks will create a demand for reserves from banks that exceeds the amount of reserves on offer; if this happens, we can expect a sharp rise in long-term interest rates and a significant fall in stock market indices.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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