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Eurozone Market Update
In November, the focus was on the European Central Bank’s (ECB’s) targeted longer-term refinancing operation (TLTRO) repayment. The first TLTRO III repayment saw an aggregate of €296.38 billion (of €2.1 trillion outstanding). This represented approximately 15% of the total outstanding amount and was below market expectations, possibly due to the short time between the ECB’s announcement and the repayment date. December’s repayment data will be a better gauge of the appetite for banks to repay the loans early. ECB President Christine Lagarde indicated the risk of recession in the eurozone has increased, but a mild recession is unlikely to quell inflation significantly. Indeed, inflation is likely to remain high for an extended period. Annual eurozone inflation did fall from 10.7% in October to 10% in November, but still has a long way to go to reach the ECB’s target.