ECB’s Lagarde says inflation hasn’t peaked, may surprise

FRANKFURT (Reuters) -Euro zone inflation has not peaked and it risks turning out even higher than currently expected, European Central Bank President Christine Lagarde said on Monday, hinting at a series of interest rate hikes ahead.

Her comments, along with remarks by Dutch central bank chief Klaas Knot earlier, were likely to dampen speculation that the ECB was about to take a gentler path with future rate increases.

Inflation in the euro zone hit a record 10.6% on an annualised basis last month, but economists polled by Reuters expect it to edge down to 10.4% in a flash reading for November due to be published this week.

Contrary to some investors and even her own deputy, Luis de Guindos, Lagarde pushed back on expectations the high watermark for price growth had been reached.

“We do not see the components or the direction that would lead me to believe that we’ve reached peak inflation and that it’s going to decline in short order,” Lagarde told the European Parliament.

She added that ECB economists still saw clear “upside” risks – financial jargon for the risk that inflation readings could come in higher than expected.

Economists polled by Reuters see euro zone inflation at 8.5% this year, 6.0% next year and 2.3% in 2024 before finally hitting the ECB’s 2% target in 2025.

The ECB has increased its rate on bank deposits by a record 200 basis points to 1.5% in three months to dampen demand in a bid to lower price growth.

The ECB’s top economic thinkers, Isabel Schnabel and Philip Lane, are now sparring over the outlook for inflation and interest rates, leaving investors scratching their heads over the ECB’s next policy moves.

Markets have been swinging back and forth about whether the ECB will raise its policy rates by 50 or 75 basis points at its next meeting on Dec. 15 and about the level at which borrowing costs will peak, which they generally see around 3%.

Lagarde, who praised the debate between Lane and Schnabel, said both questions depended on a number of variables including wages and inflation expectations.

But she added she thought there was “a way to go” with further rate hikes – a phrase also used by Federal Reserve Chair Jerome Powell.

“We clearly have to continue increasing interest rates … and my suspicion, although I do not want to venture too much into the future, is that we still have a way to go,” she said.

‘NOT IN LINE’

The Dutch central bank’s Knot was more explicit in his remarks, saying worries about “overtightening,” which were expressed by ECB board member Fabio Panetta in recent weeks, were a “a joke”.

“We are still in the process of merely removing accommodation, removing stimulus, so then to already talk about the risk of overtightening is a bit of a joke,” he told a conference.

Knot also urged caution about the ECB’s expectations for a rapid decline in inflation over the next several years and about the prospect of an imminent recession while warning about the risk of wages driving up prices.

“If you look at the most recent wage deals, they’re clearly not in line with sort of having a 1% productivity growth plus a 2% inflation target,” Knot said.

ECB’s Lagarde says inflation hasn’t peaked, may surprise

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Crypto lender BlockFi files for bankruptcy, cites FTX exposure – Times of India

 

Cryptocurrency lender BlockFi has filed for Chapter 11 chapter safety, it mentioned on Monday, the newest trade casualty after the agency was damage by exposure to the spectacular collapse of the FTX change earlier this month.
The submitting in a New Jersey courtroom comes as crypto costs have plummeted. The value of bitcoin, the most well-liked digital forex by far, is down greater than 70% from a 2021 peak.
“BlockFi’s Chapter 11 restructuring underscores significant asset contagion risks associated with the crypto ecosystem,” mentioned Monsur Hussain, senior director at Fitch Ratings.
New Jersey-based BlockFi, based by fintech government-turned-crypto entrepreneur Zac Prince, mentioned in a chapter submitting that its substantial exposure to FTX created a liquidity disaster. FTX, based by Sam Bankman-Fried, filed for safety within the United States this month after merchants pulled $6 billion from the platform in three days and rival change Binance deserted a rescue deal.
“Although the debtors’ exposure to FTX is a major cause of this bankruptcy filing, the debtors do not face the myriad issues apparently facing FTX,” mentioned the chapter submitting by Mark Renzi, managing director at Berkeley Research Group, the proposed monetary advisor for BlockFi. “Quite the opposite.”
BlockFi mentioned the liquidity disaster was on account of its exposure to FTX by way of loans to Alameda, a crypto buying and selling agency affiliated with FTX, in addition to cryptocurrencies held on FTX’s platform that turned trapped there. BlockFi listed its property and liabilities as being between $1 billion and $10 billion.
BlockFi on Monday additionally sued a holding firm for Bankman-Fried, in search of to recuperate shares in Robinhood Markets Inc pledged as collateral three weeks in the past, earlier than BlockFi and FTX filed for chapter safety.
Renzi mentioned BlockFi had bought a portion of its crypto property earlier in November to fund its chapter. Those gross sales raised $238.6 million in money, and BlockFi now has $256.5 million in money readily available.
In a courtroom submitting on Monday, BlockFi listed FTX as its second-largest creditor, with $275 million owed on a mortgage prolonged earlier this yr. It mentioned it owes cash to greater than 100,000 collectors. The firm additionally mentioned in a separate submitting it plans to put off two-thirds of its 292 workers.
Under a deal signed with FTX in July BlockFi was to obtain a $400 million revolving credit score facility whereas FTX received an choice to purchase it for as much as $240 million.
BlockFi’s chapter submitting additionally comes after two of BlockFi’s largest rivals, Celsius Network and Voyager Digital, filed for chapter in July, citing excessive market situations that had led to losses at each corporations.
Crypto lenders, the de facto banks of the crypto world, boomed in the course of the pandemic, attracting retail prospects with double-digit charges in return for their cryptocurrency deposits.
Crypto lenders aren’t required to carry capital or liquidity buffers like conventional lenders and a few discovered themselves uncovered when a scarcity of collateral compelled them – and their prospects – to shoulder massive losses.
BlockFi’s first chapter listening to is scheduled to happen on Tuesday. FTX didn’t reply to a request for remark.
Creditor record
BlockFi’s largest creditor is Ankura Trust, which represents collectors in pressured conditions and is owed $729 million. Valar Ventures, a Peter Thiel-linked enterprise capital fund, owns 19% of BlockFi fairness shares.
BlockFi additionally listed the US Securities and Exchange Commission as one of its largest collectors, with a $30 million declare. In February, a BlockFi subsidiary agreed to pay $100 million to the SEC and 32 states to settle fees in reference to a retail crypto lending product the corporate provided to just about 600,000 traders.
Bain Capital Ventures and Tiger Global co-led BlockFi’s March 2021 funding spherical, BlockFi mentioned in a press launch issued on the time. Both companies didn’t instantly reply to a request for remark.
In a weblog put up, BlockFi mentioned its Chapter 11 instances will allow the corporate to stabilize its enterprise and maximize worth for all stakeholders.
“Acting in the best interest of our clients is our top priority and continues to guide our path forward,” BlockFi mentioned.
In its chapter submitting, BlockFi mentioned it had employed Kirkland & Ellis and Haynes & Boone as chapter counsel.
BlockFi had earlier paused withdrawals from its platform.
In a submitting, Renzi mentioned Blockfi intends to hunt authority to honor shopper withdrawal requests from its buyer pockets accounts, through which crypto property are held in custody. However, the corporate didn’t disclose plans for the way it may deal with withdrawal requests from its different merchandise, together with curiosity-bearing accounts.
“BlockFi clients may ultimately recover a substantial portion of their investments,” Renzi mentioned within the submitting.
Origins
BlockFi was based in 2017 by Prince, at the moment the corporate’s chief government officer, and Flori Marquez. Though headquartered in Jersey City, BlockFi additionally has places of work in New York, Singapore, Poland and Argentina, in keeping with its web site.
In July, Prince had tweeted that “it’s time to stop putting BlockFi in the same bucket / sentence as Voyager and Celsius.”
“Two months ago we looked the ‘same.’ They shut down and have impending losses for their clients,” he mentioned.
According to a profile of BlockFi revealed earlier this yr by Inc, Prince was raised in San Antonio, Texas, and financed his faculty schooling on the University of Oklahoma and Texas State University with winnings from on-line poker tournaments. Before beginning BlockFi with Marquez, he held jobs at Orchard Platform, a dealer seller, and at Zibby, a lease-to-personal lender now referred to as Katapult.
Marquez beforehand labored at Bond Street, a small enterprise lending outfit that was folded into Goldman Sachs in 2017, in keeping with Inc.