Central Banks

China bond frenzy puts central bank in quandary

13 Aug 2024

Beijing is meddling in the market to stop long-term yields plunging even though strong demand for safe-haven government debt reduces the cost of borrowing more. Trouble is, the PBOC is worried about excessive speculation and other risks. That leaves it facing an uphill battle.

Jay Powell excels at his top job: punching bag

8 Aug 2024

Market ructions have revived Washington’s love of bashing the Federal Reserve and its chairman. From Elizabeth Warren to Donald Trump, public figures can take potshots knowing Fed independence limits the consequences. History suggests when politics really reigns, chaos ensues.

The Bank of Japan’s flipflopping can backfire

8 Aug 2024

Days after Governor Kazuo Ueda talked up interest rate hikes, his deputy is suddenly playing down the prospect. That may be intentional but it muddies the message to Japanese businesses on the outlook. It also overplays Japan’s role in sparking the global market ructions.

Investors’ black-tinted glasses obscure Fed’s role

5 Aug 2024

Stocks are sinking, with major indexes down 6% or more in August. High tech valuations and Japan’s monetary policy are factors. But a US recession is a bigger fear. Workers and consumers are suffering, but not enough for Fed boss Jay Powell to slash rates as much as traders hope.

Japan’s stock market faces a moment of truth

5 Aug 2024

Equities are falling fast as central banks rapidly recalibrate monetary policy and fears rise of a hard landing for the US economy. Japan Inc’s historic bull run was supported by a weak yen. The currency’s sudden reversal will reveal how much substance is beneath the froth.

Stronger yen is the least of Toyota’s problems

2 Aug 2024

The carmaker shed $30 bln of market value after a decisive rate hike in Japan boosted the currency. Embattled Chair Akio Toyoda is also staring at patchy earnings and a government request for "drastic reforms". As foreign exchange benefits fade, there is nowhere to hide.

Reluctant rate cut leaves the BoE with a lot to do

1 Aug 2024

The Bank of England lowered borrowing costs to 5% – its first such move since the pandemic. But division in its ranks and Governor Andrew Bailey’s cautious tone imply further easing will be slow. Given the fall in inflation, that will unnecessarily crimp Britain’s weak recovery.

Bank of Japan boldly doubles down on a new normal

31 Jul 2024

Governor Kazuo Ueda surprised with a rate hike and dangled the prospect of further tightening. Sluggish consumption and falling real wages remain major hurdles for the $4 trln economy but the central bank’s actions offer some confident and clear policy direction at last.

UK ratesetters can stop worrying and start cutting

31 Jul 2024

Markets are split on whether the Bank of England will lower borrowing costs from a 16-year high of 5.25% on Thursday. Governor Andrew Bailey worries about services prices, wages and growth. But a glimpse into the future shows that those bugbears are less scary than they look.

Fed’s next challenge: the unemployment boogeyman

26 Jul 2024

The central bank’s steady hand on rates has solidly given the economy a soft landing. Strong 2.8% second-quarter growth provides a cushion as inflation, at 2.5%, melts away. But joblessness can become a tipping point for wages, consumption, and GDP. Risks are creeping in.

China’s slump hints at a unique liquidity trap

25 Jul 2024

Record money supply has failed to revive growth. As the impact of monetary loosening fades, Beijing is ready to spend on welfare to encourage savers to consume. Inspiring the private sector to invest in a ‘socialist market economy’ is a trickier part of the problem to solve.

China rate cuts usher in next stimulus stage

22 Jul 2024

Days after Party leaders unveiled sweeping pledges to revive the $17 trln economy, the central bank unexpectedly cut key lending rates. It's a modest move but helps the PBOC establish a new benchmark and signals Beijing's urgency to speed up reforms. More policies will follow.

China’s weak economy awaits new remedies

15 Jul 2024

Growth slowed to 4.7% in the second quarter. Real estate woes endure and lacklustre consumption points to a greater reliance on exports. Policymakers can still hit their annual GDP target, but the sobering data ups the stakes for fresh fixes from this week’s Third Plenum.

China’s financial sector is put on needed GDP diet

11 Jul 2024

Officials have tweaked how they measure the value banks add to the $17 trln economy. Local governments now have less incentive to inflate lenders' deposits and loans. It's a sensible move that recognises how inefficient and bloated bank lending has become.

UniCredit-ECB spat could sharpen watchdog’s teeth

10 Jul 2024

The 60 bln euro bank is contesting in court the regulator’s demand for a faster Russia exit. At issue is whether the European Central Bank can base orders on hypothetical risks. If the supervisor wins, it may be emboldened to take tougher action on issues like climate change.

China’s central bank is stuck in a policy dilemma

9 Jul 2024

The PBOC is now intervening in short-term debt markets. Ideally it should be cutting rates to help spur more investment in the economy. But that would mean giving in to traders parking their money in government bonds – and would conflict with its mandate to foster a strong yuan.

China bond intervention is only a short-term fix

2 Jul 2024

The central bank’s decision to trade government debt may deter buyers for now and push up yields. But an economic recovery needs more than market tweaks. If this month’s Third Plenum offers few supportive policies, safe haven-seeking investors will pile back into bonds.

Bond traders’ rate-cut party is yet to get going

26 Jun 2024

Central banks from Ottawa to Frankfurt are reducing rates. Bond prices should be rallying, but an index of euro zone debt is up just 0.1% since the ECB eased borrowing costs this month. While French elections are one reason why, tight US monetary policy is the key constraint.

Riches of Japan wealth push will be thinly spread

26 Jun 2024

After decades of deflation, rising prices threaten to erode the nation's savings. The urgent official task of turning citizens into investors offers a $37 bln revenue opportunity. But megabanks and firms including Nomura will share the spoils with aggressive younger upstarts.

China central bank’s reform push is shrewd gambit

20 Jun 2024

Governor Pan Gongsheng hinted at a substantial revamp, including trading government bonds and simplifying interest rates. The changes will be a gradual process, but after having its wings clipped, they should help the central bank reassert its power in setting monetary policy.