Germany’s central bank will on Wednesday reveal how big a financial hole it faces from rising interest rates, which analysts warn will saddle it with mounting losses in the coming years and increase political scrutiny of its massive bond purchases.
The Bundesbank is being squeezed by the growing gap between the rapidly rising interest it pays to commercial banks on their deposits and what it earns on the €1tn of debt it bought in recent years as part of the European Central Bank’s bond-buying programmes, many of which yield negative rates.
The gap risks tipping the Frankfurt-based institution into its first loss since the 1970s and could put a dent in its hard-earned credibility, economists say, even though it is likely to draw on €20bn of provisions it has built up in recent years to absorb any losses for 2022.