Bitcoin Battles ECB Bond Wall: Shifting Interest Rates Tighten Financial Conditions
The European Central Bank (ECB) announced its July monetary policy decision, keeping interest rates unchanged at 2.25%, 2.40%, and 2.65%. This move preserved June's 25-basis-point increase, which means borrowers continue to pay higher rates while policymakers retain room for another increase if the energy shock spreads further into wages and consumer prices.
As a result of this decision, the ECB's bond portfolios continued shrinking. The central bank's asset purchase program (APP) and pandemic emergency purchase program (PEPP) portfolios declined by a combined €39.447 billion in June as maturing securities passed through the balance sheet without reinvestment. By July 17, the two portfolios had fallen by approximately another €31.1 billion.
The ECB listed €27.039 billion of expected APP redemptions and €24.714 billion of expected PEPP redemptions during the month, producing a combined total of €51.753 billion whose realized value may vary as securities mature and accounting adjustments pass through the portfolios.