REMINDER: LIVESTREAM MNI CONNECT With ECB's Cipollone On Oct 6

You are invited to listen to a Livestreamed MNI Connect Video Conference with ECB Executive Board Member, Piero Cipollone.

Details below:

• Speaker: ECB Executive Board Member,Piero Cipollone.
• Topic of discussion: ‘Money in the Digital Age: Digital Euro, Tokenisation and the Role of Central Banks’
• Date: Tuesday 6 October from 1400-15.30 London/0900-10.30 ET/15:00-16:30 CET
• This event will be run as a Zoom Webinar and is a public, on-the-record event.

To register please go to: MNI Webcast Registration

INVITE: Livestream MNI Connect VC CBO's Phillip Swagel Oct 22

You are invited to listen to a livestreamed MNI Connect Video Conference with the Congressional Budget Office, Phillip Swagel.

Details below:

• Speaker: Phillip Swagel, Director of the Congressional Budget Office.
• Topic of discussion: ‘The U.S. Budget and Economic Outlook’
• Date: Thursday, 22nd October 2026, 10 am to 11:30 am ET / 3 pm to 4:30 pm London time.
• This event will be run as a Zoom Webinar and is a public, on-the-record event.

To register please go to: MNI Webcast Registration

MNI INTERVIEW: ECB Swap Lines Key For Global Euro

Europe must boost the international use of its currency or become more vulnerable to U.S. and Chinese monetary influences, an advisor to the EU Parliament told MNI, calling on the European Central Bank to extend swap lines to countries with which the EU wants more trade such as India.

“Being embedded in a system where the U.S. makes the rules is all well and good as long as the U.S. is an ally, but in the current situation that's just a bad choice," Jens van’t Klooster, Associate Professor of Political Economy at the University of Amsterdam, said in an interview, adding that Europe lacks a “very significant dimension of sovereignty.”

Swap lines could be key, van’t Klooster said.

"I don't think it would be so strange to say, ‘Okay, we're going to move beyond these large financial centres, the large Pan-Atlantic central banks, and also look at countries where we want to promote monetary relationships and local banking,” he said.

“If you make a trade agreement; if you revise a piece of payment legislation; if you pass financial supervision measures for large banks, in all those contexts, dollar dependence and the issue of international euro is only going to be more important.”

PAYMENT SYSTEMS

The ECB outlined its strategy for a European international payment system in March. But while there is interest in national capitals, a lack of expertise at the European Commission and a lack of institutional accountability is slowing progress, said van’t Klooster, co-author of a recent paper on building the global euro for the European Macro Policy Network think tank.

It calls on the EU to set out an internationalisation strategy, create a cross-institutional tokenisation taskforce, and track progress through the Commission's Economic and Financial Affairs Council said van't Klooster, adding that MiCar, the EU’s 2024 crypto-asset regulation framework, may also need to be revisited.

The Chinese yuan has recently surpassed the euro in key metrics such as trade invoicing, he noted. Allowing the U.S.'s promotion of stablecoin to go unchallenged would also mean even more far-reaching dollarisation, including in the EU periphery, he said. 

"If U.S. tech firms such as Meta, Google, etc., start marketing these assets, that could happen very quickly,” he said. “In a different scenario - and this is my view - there is a big crisis, comparable to a re-run of 2008. European banks would then be dependent on the dollar, and it's not hard to see how this current U.S. administration would use that for leverage.”

While the ECB has focussed on a digital euro as opposed to stablecoins, its tight holding limits designed to protect Europe’s banks from competition are a significant limitation, said van’t Klooster said.  (See MNI: Digital Euro On Track For Approval By End Of The Year)

Completing the capital markets union and creating a common EU safe asset would also help, but have become “a bit overemphasised in the debate around the internationalisation of the euro,” he said.

MNI INTERVIEW2: Higher Global Rates Could Be Structural Shift

Higher global interest rates could be a structural change as increased government borrowing and a surge in AI-led investment soak up the savings glut of the early decades of the century, the chief economist of a leading UK mortgage lender told MNI, adding that tightening financial conditions may do some of the Bank of England’s work for it.

"When it comes to the long-term interest rates, it feels like there's been a structural shift taking place," Robert Gardner of the Nationwide Building Society said in an interview.

"If you think back 20 years ago when we were talking about a global savings glut and how that was pushing down yields across the developed world," he said. 

"Now, a combination of an increase in government debt globally, which is absorbing a lot of those savings, and then we've had a huge acceleration in investment led by AI, and the net effect is that it's pushed up long-term interest rates. This has tightened financial conditions around the world as a result," Gardner said. 

CONDITIONS AID BOE

Financial markets are pricing in a rise in Bank Rate when the Bank of England’s Monetary Policy Committee meets in November, but there is debate as to how much tightening could be needed after that. (See MNI INTERVIEW: More Difficult For BOE To Look Through-Sentance )

"A lot of this rise in market interest rates has done quite a bit of financial tightening for [the BOE] already," Gardner said. 

"Clearly energy prices pose upside risks to inflation and hence interest rates. But is it’s also still possible that these increases in energy prices could ultimately bear down more on the demand side of things rather than supply, even though it's obviously going to push up headline inflation near term," he added. (see MNI POLICY: BOE's Focus On Energy Supply As It Swings To Hikes )

Given uncertainty and the lags involved in monetary policy, policymakers are in a difficult position, Gardner said, but he noted "given the experience of recent years most would probably argue, understandably,  that leaving policy too loose is likely to prove a more costly error than having policy too tight."

MNI INTERVIEW: UK Property Market Battles Headwinds

UK house price growth slowed markedly in the year to September, but an improvement in affordability should help underpin the market despite headwinds, the chief economist of one of the nation's leading mortgage lenders told MNI.

"The fact that sentiment is weak is not surprising, and that housing market activity and house price growth has slowed," the Nationwide building society's Chief Economist Robert Gardner told MNI Thursday.

"Geopolitical tensions remain high, with the conflict in the Middle East exerting upward pressure on energy prices, fanning inflation concerns. This in turn has led to mounting financial market expectations of Bank Rate increases, which has maintained upward pressure on the market interest rates which underpin mortgage pricing.”

NERVOUS

Consumers "are understandably nervous about the rise in energy prices, what that might mean for interest rates and that seems to be weighing on sentiment," Gardner said, highlighting the increased visibility of higher inflation to consumers as food and fuel prices rise. "People see it when they go to fill up their cars and in the supermarket." 

 "The hope is of course that this energy shock will soon pass. That in turn will hopefully allow market interest rates to come back down and would, in turn, allow the market to regain momentum. The problem is it's very hard to know when that's going to happen," he noted. (See MNI INTERVIEW: UK Consumer Enjoys July 'Burnham Bounce' - GfK  )

According to Nationwide data published on Thursday, September saw UK annual house price growth halve to 0.8%, the weakest since December 2025, though the average price across the UK remained close to record highs.

Gardner highlighed that underlying fundamentals remain positive.

"Credit quality remains strong, because the employment situation is still holding up well. As a result, we don't see any signs of forced selling and the sorts of things that would lead to more significant downward pressure on prices," he said

AFFORDABILITY

Gardner's preferred measure for looking at the underlying strength of the market is Nationwide's own long-run affordability series. 

"Using this measure, you can see the extent to which housing costs are stretched by historic standards, and the story has been one of a steady improvement in affordability over the last 18 months or so," he said, despite a modest retracement since the start of the U.S.-Iran conflict.

"Similarly, as a result of the same trend, the house-price-to-earnings ratio has come down to its lowest level for over a decade, and that's important because it means deposit requirements aren't as binding as they were before," he said

There has also been an improvement in credit availability in the last couple of years with household balance sheets improving.

"If you look at the total amount of household debt relative to household income, that's almost at close to 20-year lows," with households saving an "unusually large proportion of income in recent years," he said. " Household balance sheets appear solid.”

MNI POLICY: BOJ's Ueda Coy On Inflation To Keep PM On Side

The avoidance of any acknowledgement that inflation is above target by Bank of Japan Governor Kazuo Ueda is aimed both at averting potential criticism from Prime Minister Sanae Takaichi and at keeping good relations with her government ahead of key appointments to the BOJ board including that of his own successor, MNI understands.

Ueda’s stance has caused some confusion in markets, given clear signs that underlying inflation is already above 2%, despite the BOJ’s insistence that it is still only approaching 2% as it withdraws some monetary accommodation. However, while such an acknowledgement would tend to boost bond prices and the yen, officials fear that it would feed expectations of an accelerated series of rate hikes, whereas the BOJ prefers a more cautious and gradual approach.

Officials also worry that such an admission would indicate that the Bank had fallen behind the curve in containing inflation, potentially exposing it to criticism from the government. (See MNI INTERVIEW: Ex-BOJ Sakurai Sees Dec Hike, 2% Terminal Rate)

Core CPI excluding fresh food and institutional factors rose 2.6% in August, while the core measure excluding fresh food, energy and institutional factors rose 2.2%, the 23rd and 25th straight month above target respectively. All the BOJ’s models show a moderate increase in trend inflation, with estimates hovering in a range from 1.5 to around 2%, it said in July.

KEEP GOVERNMENT ONSIDE

The BOJ’s approach has been driven partly by its attempts to keep the government onside as it hikes rates. It has preferred to frame its actions as a withdrawal of accommodation as downside risks to the economy have receded. (See MNI POLICY: December BOJ Hike In View After September Tankan)

Officials are conscious also that Ueda needs to deepen his relationship with the prime minister in order to boost the chances that she will ask him to recommend possible candidates to take over as the next BOJ governor and for the two deputy governor positions. Ueda’s term will conclude in April 2028, and the prime minister’s office will begin narrowing down candidates to replace him towards the end of 2027.

While prime ministers usually ask for the BOJ governor’s opinion about a potential successor, Takaichi, if she remains in office, looks like nominating reflationists to all these posts, former senior BOJ officials warn, adding that this could significally detract from the credibility and independence of the central bank. A credible appointment of at least one deputy governor with solid market and monetary policy credentials, such as a former BOJ executive director, could mitigate some of this damage, they conceded.

Takaichi is already widely expected to appoint reflationists to replace two board members when their terms expire in July 2027, after appointing two other dovish members earlier this year. The two new members dissented against September’s rate hike.

MNI INTERVIEW: ISM Chief Says Risks Tilted To The Downside

U.S. manufacturing expanded again in September but risks are tiled to the downside as price pressures mount, Institute for Supply Management manufacturing chair Susan Spence told MNI Thursday.

"I'm tending to be more concerned, even though we're in expansion, because we have a war, we have trade wars, and we seem to have no end to the threats," she said in an interview. 

Spence continues to be worried that the PMI could drop closer to 50. The headline measure in September ticked down to 54.5 from 54.6 in August, versus market forecasts for 55.0. The ISM production index eased 1.6 percentage points to 56.7.

Despite growth, ISM survey respondents are worried about further shocks, she said. "The survey takers are looking around and wondering what's next? What tariff war is next? And this Iran war was supposed to be very brief."

Asked about the balance of risks, Spence said: "I think to the downside." 

"The roller coaster especially around tariffs has taught us some lessons last year, which is that your numbers could be good but that can kind of change on a dime. Sometimes the increases in new orders are because people are trying to get ahead of tariffs."

"I want to see this expansion really take off, like high 50s and 60s, but you've got these worrisome factors going on," Spence said, citing continued policy uncertainty and shocks. 

PRICES SURGE

The prices paid measure increased by 6.8 to 77.9, its highest level since May. Many respondents continued to flag price and supply chain pressures. Almost 60% of manufacturing respondents indicated they were experiencing higher prices, a jump from 46.2 in the prior month's reading. Only 2.8% were experiencing lower prices. 

There were 24 commodities reported up in price versus none reported lower, and 11 commodities reported in short supply, highlighted by metals and tech-related items. (See: MNI POLICY: Fed In No Hurry But Committed To Taming Inflation) 

"There are more commodities up since the start of the war, and so I'm worried it will choke it off. That's kind of my conclusion," Spence said. 

The new orders index increased 1.6 percentage points to 55.3, employment was up 1.5 points to 52.7, inventories were down 2.0 to 48.6, and backlog of orders increased 4.6 points to 56.4. 

General sentiment was worse than last month, amid some demand softening, Spence said. "It feels like there's a stutter step there that eventually will hit production and backlog."