Central Banks

The bubble in predicting the end of the world

1 Dec 2022

The globe faces multiple threats to peace and prosperity. Several new books address the challenges of enormous debt, geopolitical rivalries and climate change, predicting disastrous consequences. The best thing investors can do is keep a level head, writes Edward Chancellor.

Inflation confusion increases odds of ECB mistake

30 Nov 2022

Euro zone prices rose a less-than-expected 10% in November, yet remained stubbornly high after stripping out fuel. That leaves central bankers in a pickle. To burnish their hawkish credentials with a sceptical market, they may keep tightening policy even as the economy falters.

Gulf’s World Cup love-in has uncertain shelf life

25 Nov 2022

Egypt and Turkey used the tournament to smooth over old differences, and ex-rivals Saudi Arabia and Qatar are getting along. Riyadh may even use its new oil heft to put $5 bln in cash-strapped Ankara’s central bank. The risk is new tensions, perhaps over Iran, upend the goodwill.

Bank of England inflation fight easier than Fed’s

24 Nov 2022

An OECD study shows supply shocks are pushing up American prices, while strong demand is a bigger factor in the UK. That makes BoE Governor Andrew Bailey’s task more straightforward than Fed Chair Jerome Powell’s. For Britain, though, price stability will deepen economic woes.

Capital Calls: Fuzzy Fedspeak, Dr. Martens

24 Nov 2022

Concise views on global finance: The U.S. central bank has left traders guessing the meaning of the word “various”; shares in the recently listed British bootmaker fell 20% after sales missed expectations, and a warning that its investment needs will hurt profitability.

The music at India’s credit party is strained

9 Nov 2022

State Bank of India and its peers are lending at their strongest pace since a bad debt crisis. Some others are going to unusual measures to attract deposits. Far from being a sign the country will emerge as a global bright spot, banks may soon start pulling back.

If 8% inflation is worrying, 3% could be worse

2 Nov 2022

With U.S. prices rising at their fastest in 40 years, the Fed must keep raising rates. But what if inflation slows only to hover above the central bank’s 2% target? That would present two unappealing choices: Move the goalposts, or squeeze a creaking economy even tighter.

Europe’s diverging prices complicate ECB’s task

1 Nov 2022

Inflation is running at 7% a year in France and 22% in Estonia. These differences make the European Central Bank’s stance too aggressive for some states and too timid for others. The controversy about monetary policy will only intensify as the ECB pushes rates higher.

Capital Calls: ECB’s bank-earnings squeeze

27 Oct 2022

Concise views on global finance: Seeking to shrink its balance sheet, the European Central Bank introduced less favourable terms for cheap loans it offered to lenders during the pandemic.

ECB $2 trln bank-loan unwind is fraught with peril

25 Oct 2022

The European Central Bank may tweak a funding scheme to stop lenders minting money at its expense. Fiddling with the terms is legally dubious. Other options could undercut its fight against inflation. But the status quo, indirectly costing taxpayers billions, is unsustainable.

Central banks get sucked into financial black hole

14 Oct 2022

Bank of England Governor Andrew Bailey and his peers are raising interest rates to fight inflation. But indebted households, governments and companies make it hard to break free from ultra-easy money. The turmoil will force central banks to change course, says Edward Chancellor.

Bailey outburst blunts BoE crisis-fighting tools

12 Oct 2022

The Bank of England governor vowed to stop bond-buying designed to help pension funds, despite suggestions he might extend it. In the current turmoil, subtlety and strategic ambiguity are key BoE tools. Andrew Bailey has instead locked himself into a path he may need to reverse.

BoE drawn into risky game of financial whac-a-mole

11 Oct 2022

The Bank of England said it would buy more bonds to avert a fire sale by pension funds. Its plan to end such support on Oct. 14 is hampered by a distressed bond market, and wayward government. Governor Andrew Bailey risks either backtracking again, or letting the economy suffer.

Capital Calls: Buffett’s Berkshire successor

4 Oct 2022

Concise views on global finance: The Omaha oracle owns $100 bln of stock in his conglomerate. His potential successor Greg Abel’s purchase of $68 mln of stock last week – after selling shares in a subsidiary for $870 mln in June – is too small a move toward Buffett’s standard.

The end of cheap money reveals global debt problem

3 Oct 2022

Borrowing has risen to more than 250% of world GDP, far more than before the 2008 financial crisis. Rising interest rates and low growth make this burden harder to bear, causing economic stress in Europe, China and the Global South. This will poison geopolitics, says Hugo Dixon.

Capital Calls: Tesla greases supply-chain fears

3 Oct 2022

Concise views on global finance: The $760 bln electric-car maker manufactured more vehicles in the third quarter but delivered fewer than analysts were expecting, raising fresh concerns about the industry’s ability to get production running smoothly again.

BoE remedy can only be partial cure for UK ills

29 Sep 2022

The UK central bank launched $70 bln of bond-buying after PM Liz Truss’s budget triggered market chaos. That has stemmed a financial crisis among indebted pension funds. Stopping the market exerting economic pain requires a fiscal rethink from politicians, not more BoE action.

Behind Britain’s self-inflicted financial crisis

28 Sep 2022

Sterling fell to a record low and gilt yields soared after finance minister Kwasi Kwarteng unveiled a raft of unfunded tax cuts. In this Viewsroom podcast, Breakingviews columnists explain the long-term damage to the UK’s credibility and what will rebuild investors’ confidence.

BoE’s bond-buying U-turn is worth the risk

28 Sep 2022

The Bank of England will buy UK sovereign debt and delayed sales of its $915 bln bond portfolio due to market “dysfunction”. The danger is Governor Andrew Bailey looks too close to the government whose tax cuts caused the turmoil. Yet calmer markets make it easier to hike rates.

UK swaps one cost-of-living crisis for another

27 Sep 2022

The Bank of England may raise rates past 5% to stem the inflationary effect of Chancellor Kwasi Kwarteng’s tax cuts. Homeowners, saved by the government’s energy price cap, now face a surge in mortgage costs. That will sap growth and add to pressure for banks to help customers.