Central Banks

ECB caught in a rate quagmire of its own making

20 May 2022

The European Central Bank may raise rates in July but is divided on how high it should go. By then, weakening growth will make it harder for President Christine Lagarde to end the eight-year era of negative rates. Moving earlier to curb inflation would have avoided the dilemma.

Inflation revives spectre of the long bear market

19 May 2022

The S&P 500 Index has fallen almost 20% from its early January peak. Such downturns have become shorter and less frequent due to support from the Federal Reserve, says Edward Chancellor. But rising prices have removed the safety net. The next selloff could inflict more damage.

Egypt’s hunger pangs are like 2011, but worse

19 May 2022

A decade ago the soaring cost of bread helped unseat Cairo’s long-term ruler, Hosni Mubarak. In 2022 food prices are rising faster, and Egypt’s population and debt are bigger. The more prices rise, the trickier the tradeoff between enraging financial and domestic constituencies.

Hong Kong can afford slow road to digital currency

19 May 2022

There’s some FOMO in the local e-HKD effort. Central banks elsewhere have better reasons to act faster, including low rates of financial inclusion and less use of physical cash. Hong Kong would do well to think longer about privacy concerns and to learn from other experiments.

Using Russian assets in Ukraine would be a mistake

17 May 2022

Seizing $200 bln of central bank reserves frozen by the EU and U.S. could provide financial relief and moral comfort to the war-torn country. But it would also trigger legal fights and give Russia even less reason to back down. Confiscation is no substitute for a realistic plan.

Germany and France could make ECB’s life easier

16 May 2022

Inflation is surging in Europe’s biggest economies and the central bank is keen to avoid a wage-price spiral. If Berlin and Paris help the poorest households cope with rising costs, there may be less pressure for hefty pay rises. That would be a big help for rate-setters.

Chelsea’s generous buyer, U.S. inflation pain

12 May 2022

Roman Abramovich is selling the soccer team to a group led by LA Dodgers co-owner Todd Boehly for $3 bln. In this Viewsroom podcast, Breakingviews columnists discuss the chunky valuation and the owner’s spending plans. Also, high prices are hitting the rich as well as the poor.

India heatwave throws food security for loop

12 May 2022

Crops are wilting after weeks of climate change-induced scorching temperatures. On top of domestic pain, it casts doubt on India’s new role exporting grain to replace supplies lost to Russia’s war in Ukraine. That’ll create more dilemmas for political leaders near and far.

Fed manages to hurt both rich and poor

10 May 2022

Past tardiness in tackling surging inflation means low-income U.S. households face huge increases in the cost of living. Now, Fed Chair Jay Powell may have to hike rates so much that growth falters – a prospect hitting stocks and richer households’ net worth. Misery has company.

Capital Calls: Turkey, Nintendo/Sony, India IPO

10 May 2022

Concise views on global finance: President Erdogan makes another ham-fisted monetary intervention; the Switch maker weathers supply chain ructions better than its larger rival; New Delhi needs to be even more generous in its landmark listing of Life Insurance Corp of India.

Zimbabwe borrows from bank of bad ideas, again

10 May 2022

With inflation at 96%, Harare plans to stop further currency slumps by a ban on bank lending. That stymies a sly trade where insiders play the spread between official and black-market FX rates. But as with prior moves it’s a blunt tool that erodes rather than builds confidence.

Fed jumps into field of financial land mines

4 May 2022

The American central bank has little choice but to hike interest rates and cut its balance sheet to fight inflation. But Chair Jay Powell’s moves make the $24 trln U.S. Treasury market more vulnerable to shocks. Bigger future increases could even tip the U.S. into recession.

Australia’s ANZ spoils interest rate party

4 May 2022

Boss Shayne Elliott is downplaying the benefits of central bank action at his $770 bln lender and ditching cost targets because of inflation. It’s a sober message compared to peers like HSBC counting on hikes for a boost. Erring on the side of caution is a better approach.

Bitcoin’s African outpost raises several red flags

2 May 2022

War-torn Central African Republic is following El Salvador in adopting the crypto unit as legal tender. The surprise of the region’s central bank and Bangui’s use of sanctioned Russian mercenaries are warning signs. Bitcoin’s quest for mainstream acceptance just got harder.

ECB forecasting snafus may turn into trust problem

28 Apr 2022

Christine Lagarde’s central bank underestimated how high inflation would soar and deferred rate hikes. Its own research says rising inequality hurts faith in public institutions. Soaring prices risk undermining such confidence, which is critical in a still-young currency union.

Capital Calls: U.S. GDP fall masks solid economy

28 Apr 2022

Concise views on global finance: Consumer spending and business investment are resilient amid price hikes.

Dollar is worst reserve choice except for the rest

27 Apr 2022

Sanctions on Russia raise questions about the U.S. currency's reliability for foreign governments. But options like the euro are also tied to restrictions. And the Chinese yuan lacks convertibility, rule of law and safe-haven appeal. Reports of the dollar's demise are premature.

European banks’ buyback boom faces bad-debt risks

22 Apr 2022

After two lean years, investors had hoped 2022 would bring bumper payouts from Barclays, BNP Paribas, and other big lenders. But the Ukraine war raises the chances of a recession. Rebuilding default buffers, which are slimmer than before the pandemic, may now be the priority.

Explaining the Fed’s tolerance for high inflation

21 Apr 2022

U.S. prices are rising by more than 8% a year, yet the central bank only just started raising interest rates. One possibility is that it fears a financial crisis, Edward Chancellor argues. Another is that inflation is the least painful way to resolve deep-seated social conflicts.

Capital Calls: China GDP, Fed bank cop, Singapore

18 Apr 2022

Concise views on global finance: China’s GDP print adds fuel to the easing debate; Former Treasury official Michael Barr is set to become America's next top bank regulator; Singapore’s succession plan clears the deck for other pressing business.