Central Banks

ECB funding aid needs to be wider, not just longer

25 Nov 2011

The central bank is considering offering longer-term loans to the euro zone’s stricken lenders. Bankers also want it to broaden the pool of collateral it will lend against. Though the ECB will not want to get swamped, easing some rules might help prevent small banks going bust.

U.S. lawmakers squandering gift from markets

21 Nov 2011

Global investors have given Congress lots of rope to rein in long-term deficits before they enter crisis mode. The committee charged with the task failed to make any progress. So far, markets are enabling such inaction. Washington, and the world, won’t always be so lucky.

IMF could unlock ECB’s war chest

21 Nov 2011

The European Central Bank is reluctant to fund euro zone governments for fear of breaking its own rules and EU treaties. But the law could allow it to channel cash via the International Monetary Fund. That may sound dodgy, but could be a safer way for the ECB to fire its bazooka.

What’s stopping the ECB firing its bazooka?

17 Nov 2011

The central bank is facing mounting pressure from around the world to act more freely as a lender of last resort to euro zone governments. The ECB has been reluctant to move. But even though it is hemmed in by law, ideology and past positions, it does have wiggle room.

Not saving Italy works best for ECB

15 Nov 2011

The central bank could easily keep Italy afloat. Printing money on the Bank of England’s scale would fund the government for all of 2012. But playing tough suits the ECB. Berlusconi is out and the chances for serious reform are better. Still, the pressure to print won’t go away.

Euro zone should prepare post-Berlusconi bazooka

8 Nov 2011

Germany and the ECB have been right to keep Italy on tenterhooks so long as it had a delinquent government. But even a credible new government will probably need help to get its borrowing costs under control. That means unleashing the central bank’s firepower in one form or other.

Bank of England reaches limits of independence

8 Nov 2011

UK parliamentarians have called for the central bank to be better governed and more accountable. Keeping the government at arm’s length is important. But the Bank of England’s new powers for financial stability and bank supervision make greater political scrutiny inevitable.

Fed might actually need maligned savers

7 Nov 2011

Ben Bernanke said last week that low interest rates, which penalize savers, served the greater good of economic growth. But high savings rates correlate with growth over both the long and short term. Bernanke’s discouragement of prudence could yet stymie his objective.

Draghi-led ECB keeps Greece at arm’s length

3 Nov 2011

The bank’s new president jolted markets with a surprise cut in interest rates while his benign tone on the Greek crisis implied that he thinks that is an issue for governments to resolve. It’s hard to believe the ECB isn’t concerned. But the aloof approach may pay off.

U.S. deficit drama needs to play well overseas

3 Nov 2011

Foreign central banks, among America’s most reliable lenders, have been cutting their exposure to Uncle Sam’s debt since August. As Washington readies “Deficit Debacle: The Sequel” for primetime this month, legislators should keep foreign audiences in mind.

ECB on track to waste a good crisis

2 Nov 2011

Draghi will chair his first meeting of the central bank on the week of the euro zone’s great Greek scare and as all data point to a recession. The ECB should lower rates and make clear it’s prepared to be a lender of last resort to responsible governments – but probably won’t.

New ECB chief must shake off the Italian curse

31 Oct 2011

The incoming president of the European Central Bank inherits a strong currency in a weak monetary union. As Mario Draghi steers the bank through a series of crucial decisions, he needs to tackle Italy’s problems without worrying too much about what the Germans will say.

Berlusconi opts for risky ECB row with Paris

21 Oct 2011

Ignazio Visco is highly qualified for the job as head of the Bank of Italy. But choosing Lorenzo Bini Smaghi, a member of the European Central Bank’s board, would have allowed France to nominate its candidate to the ECB’s top body. Berlusconi doesn’t need a fight with Paris now.

UK inflation belies central bank’s claim to care

18 Oct 2011

If the Bank of England thought controlling inflationary psychology was priority number one, it would not be printing money when prices are rising at a 5.2 pct rate. But the BoE is more worried about slow growth and financial tension. Inflation is, at worst, a tolerable evil.

Good aim needed for ECB’s covered bond sortie

7 Oct 2011

The euro zone central bank will buy another 40 bln euros of covered bonds. The amount looks pitiful, far from enough to relieve the sovereign crisis or banks’ dire funding problems. But if the ECB focuses on Spanish and Italian banks, the programme may not be a total waste of time.

U.S. government has chance to borrow very long

30 Sep 2011

Thanks to the Fed’s maneuvers, Uncle Sam could sell bonds maturing decades from now at uncommonly low yields. Moreover, pension funds need the paper. The Treasury has kicked around the idea of 50 or 100-year bonds before. Maybe it’s time to actually issue some.

Economists shouldn’t bask in woes of physicists

26 Sep 2011

Theorists on production and consumption, often jealous of their hard-science counterparts, may be tempted to gloat if neutrinos really do travel faster than light. But ignorance by economists is more harmful. It contributed to the financial crisis and subsequent policy paralysis.

Fed’s Twist puts Wall Street in a spiral

22 Sep 2011

Extra stimulus pushed 10-year Treasury yields to a new low and could leave them under 2 pct for a while. That doesn’t just crimp interest margins for retail banks; it also squeezes already struggling debt traders. Financials now look nothing but a super-long-term investment.

Monetary moves have lost their magic

22 Sep 2011

Markets spurned the Fed’s latest love offering. The Twist was seen correctly as a small manoeuvre that can do little to speed up growth. It could even be more dangerous than helpful. Central banks should not try too hard - the pains of economic rebalancing cannot be avoided.

Bernanke’s twist may not be much to shout about

21 Sep 2011

The Fed’s revival of a 50-year-old idea to reduce long-term interest rates is four times heftier than the original. It adds to Fed balance sheet risk and to price pressures; more helpfully, it could boost small business lending. Overall, though, it’s unlikely to achieve much.