Central Banks

Lowly Europe bank values will outlast dividend ban

26 Nov 2020

Big lenders blame frozen payouts for depressing share prices, down 17% on average this year. But the selloff broadly matches the decline in profit forecasts for 2022, suggesting ultra-low interest rates are to blame. Even if dividends return, discount valuations may persist.

Kiwis test limits of overburdened rate setters

26 Nov 2020

New Zealand Finance Minister Grant Robertson has suggested the central bank, which targets inflation and employment, might consider taking house prices into account when setting monetary policy. Interest rates are a blunt instrument that can’t hit too many goals at once.

China’s e-yuan solves one stimulus problem

24 Nov 2020

Digital currency transactions have topped $300 mln as the central bank steps up trials across the country. Virtual money that’s traceable is showing promise in getting consumers to spend rather than hoard. That might spur Beijing to use cash handouts to boost consumption.

Mnuchin and Powell create dangerous guessing game

20 Nov 2020

The U.S. Treasury secretary and Fed chief’s spat over unused bailout funds is a Rorschach test. Fiscal hawks may see an attempt to coax Congress into spending elsewhere. Others may see a petty gesture by an outgoing administration. The uncertainty is what poses the greatest risk.

Turkey gives investors early Thanksgiving treat

19 Nov 2020

The new central bank chief hiked a key interest rate to 15% from 10.25%, the biggest tightening in more than two years. He vowed to bear down on inflation and improved transparency by reducing the number of policy rates that matter. It’s a good start at rebuilding market trust.

Bond defaults hand Beijing a timely oversight test

19 Nov 2020

A surprise default by a state-owned coal miner has undermined confidence in the $2.7 trln triple-A market. Without tougher supervision of credit agencies, local officials, and company executives, President Xi Jinping’s fight against excessive leverage will pile on systemic risk.

Republicans try packing the Fed before Trump exits

13 Nov 2020

The U.S. Senate will vote on Judy Shelton’s nomination to the central bank’s board. She was in limbo partly due to fringe ideas, like a return to the gold standard, and has shown her partisan colors. Installing her before the White House changes hands is bad monetary policy.

ECB has chance to avoid Fed’s strategy revamp flaw

12 Nov 2020

Christine Lagarde’s central bank is examining basics, like how it defines its price goal. Its U.S. peer earlier this year switched to aiming for inflation that averages 2% over time. But leaving things as vague as Jerome Powell did undermines efforts to lift price expectations.

Bank of Japan’s M&A fix will test depth of slumber

11 Nov 2020

The central bank will pay 0.1% on deposits of small lenders if they cut costs or merge. Prodding weaker institutions to shape up will add to its reputation for radical innovation. But bosses have vested interests. Success will depend on rousing Japan’s supine shareholders.

Fed is only half way to climate-change conversion

10 Nov 2020

The U.S. central bank finally acknowledged that a warming planet poses real risks to the financial system. The Damascene moment is late but sets the scene for more concrete action now that the politics looks more favorable. And at least the Fed will have a late-mover advantage.

Corona Capital: Warren Buffett, Burger boost

9 Nov 2020

Concise views on the pandemic’s corporate and financial fallout: Rising share prices take the sting out of Berkshire Hathaway’s Covid-19 profit hit; and McDonald’s reports a good quarter for American nugget-lovers.

Turkey’s new economy team will face fresh problems

9 Nov 2020

President Tayyip Erdogan installed a new central bank boss while his son-in-law quit as finance minister. Credible policymakers are more likely to hike rates. Just as well: without President Donald Trump, Ankara’s foreign policy – and the lira – are more vulnerable to sanctions.

Bank of England offers plaster for Covid-19 wound

5 Nov 2020

Governor Andrew Bailey will buy an extra 150 bln pounds of government debt, allowing finance minister Rishi Sunak to keep spending during a new lockdown. But the pandemic’s structural shifts may leave behind workers who lack the right skills. Only the state can fix that problem.

China’s latest five-year plan girds for battle

2 Nov 2020

The 2021-2025 blueprint lacks a growth target despite a longer-term GDP per capita goal. That suggests Beijing is aiming for quality over quantity. An emphasis on military defence and technology self-sufficiency also speaks to anticipated geopolitical and corporate arms races.

Noel Quinn deftly sails HSBC into stiff winds

27 Oct 2020

A 36% fall in quarterly profit was better than feared thanks in part to choppy markets. The CEO’s plan to wring more fees out of customers is also welcome. Low interest rates are only one problem, though. UK, U.S. and Chinese authorities loom too large over the bank’s prospects.

Review: Picking the turning point in inflation

16 Oct 2020

In “The Great Demographic Reversal”, Charles Goodhart and Manoj Pradhan make a good case for why prices will take off. Ageing societies need more carers and labour scarcity may finally lift wages. But they’re perhaps too sanguine on how soon pandemic-stricken economies can heal.

The Exchange: The long wait for inflation

6 Oct 2020

Charles Goodhart and Manoj Pradhan tackle an issue perplexing policymakers and investors: if, and when, price pressures will rise. The authors of “The Great Demographic Reversal” discuss ageing societies, emerging economies, and why the world won’t follow in Japan’s footsteps.

Corona Capital: Fiscal stimulus, Fitness riches

6 Oct 2020

Concise views on the pandemic’s corporate and financial fallout: Central bankers including the Federal Reserve’s Jerome Powell urge more fiscal help as Covid-19 cases rise again; and the owner of NordicTrack treadmills raises cash at a $7 billion-plus valuation.

ECB’s valiant “lowflation” brainstorm has a flaw

30 Sep 2020

President Christine Lagarde outlined several ways the central bank’s strategy might adapt to a world where prices rise too slowly, not too fast. For all its merits, the exercise assumes rate-setters have full control over inflation. The past decade shows they don’t.

Angst-ridden end to 2020 is written into options

23 Sep 2020

As if Covid-19 hadn’t sparked enough market gyrations, the next three months bring U.S. elections, tense UK-EU trade talks, and more. Central bankers are keeping bonds on a tight leash so jitters will be channelled into currencies. That is already showing up in FX option prices.