Central Banks

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.

ECB can start worrying about growth, not inflation

6 Jun 2024

The European Central Bank cut interest rates for the first time since September 2019, but predicted inflation will stay above its 2% target until 2026. That could tempt Frankfurt hardliners to delay further monetary easing. Doing so would endanger the bloc’s fragile recovery.

Russian bond rout raises risk of financial crunch

4 Jun 2024

Yields on the country’s debt are at 20-year highs on worries about the budget largesse lavished on the economy. With inflation rising and interest rates at 16%, President Vladimir Putin’s desire to keep funding the conflict in Ukraine could result in lasting fiscal turmoil.

Change is coming to UK’s macroeconomic policy

31 May 2024

The opposition Labour Party, the strong favourite to win the upcoming election, has promised continuity in its fiscal and monetary approach. An ugly economic inheritance at home and global challenges abroad make that ambition unrealistic. Investors should prepare for a shift.

Fed should be independent, not untouchable

28 May 2024

Allies of Donald Trump want to blunt the Federal Reserve’s autonomy if the former US president wins a second term. That would be economically disastrous. But a mighty central bank with a $7 trln balance sheet requires better scrutiny, especially outside monetary policy.

Japan’s new widowmaker trade may have shorter life

23 May 2024

For more than two decades, investors who bet against Japanese government bonds lost their shirts. Taking a long position in the yen has been similarly painful recently as the currency dropped by 50% against the dollar. Yet there are several reasons why the slide could reverse.

The dollar and the yuan are polar opposites

16 May 2024

The strong greenback and questions over a Chinese devaluation reflect the contrasting outlooks for the two economies. In this Viewsroom podcast, Breakingviews columnists debate why Beijing is unlikely to push down its currency and why the dollar will remain elevated.

Yuan devaluation isn’t worth the trouble

14 May 2024

A weaker currency would boost exports and prices, but speculation China could engineer a fall underestimates Beijing’s desire for a stable exchange rate. Aggressive US tariffs could change the calculus. For now, official signals point to a slow grind lower against the dollar.

Economic hard landing is delayed but not cancelled

10 May 2024

It’s two years since the Federal Reserve started hiking interest rates, yet economic growth has picked up and stocks have hit new highs. There are several reasons why the US economy is less responsive to tighter monetary policy. But it cannot avoid the effects indefinitely.

BoE cavalry will arrive too late for Rishi Sunak

8 May 2024

After a local polls rout, the UK prime minister badly needs an economic boost before this year’s national elections. But Bank of England Governor Andrew Bailey will only cut rates when inflation drops from the current 3.2%. By then, it could be too late for the government.