Central Banks

India Insight: Facing the pandemic on a shoestring

23 Mar 2020

As it braces for an outbreak of Covid-19, India lacks the authoritarian system that helped China cope and the advanced healthcare of Italy. India’s experience will illustrate the added struggle that poor, unruly nations face from rising disease and a straightjacketed economy.

China’s rate caution is conscious uncoupling

23 Mar 2020

The central bank is holding lending benchmarks steady as global peers slash. Bad debts and capital flight risk make big fiscal and monetary moves more dangerous than in 2009. That pushes the burden for stimulus to the government. Either way, structural imbalances will get exacerbated.

BoE gives lenders handy crisis-accounting template

20 Mar 2020

The UK regulator told banks to treat the virus shock as temporary when calculating bad debt. That gives them leeway to be flexible with vulnerable borrowers without worrying about a capital whack. It’s less drastic than suspending accounting rules. Other watchdogs should follow.

Bank of England deploys old tools for new problem

19 Mar 2020

New boss Andrew Bailey has cut UK interest rates to 0.1% and ramped up bond buying. Among the reasons for the easing is a deterioration in the government debt market that is leading to a tightening of financial conditions. Even massive asset purchases may not fix that headache.

Next G7 headache is a disorderly currency market

19 Mar 2020

The dollar is surging amid a dash for cash. Exchange rate swings are verging on the sort of unruly moves that policymakers say they dislike. Public expressions of displeasure can be the first line of defence. If these don’t work, official sales of the U.S. currency may be needed.

Christine Lagarde proves a worthy heir to Draghi

19 Mar 2020

The ECB boss echoed her predecessor’s “whatever it takes” pledge by unveiling 750 billion euros of new asset purchases. That eases tension in euro zone bond markets but can’t offset the global dash for cash. Crucially, she also opened the door for other once-taboo measures.

Emerging markets dollar lifeboat leakier than 2008

19 Mar 2020

Capital is heading out of Indonesia, Turkey and other emerging economies faster than in the financial crisis. Like then, the Fed should set up dollar swap lines with some of their central banks, and the IMF should boost reserves. But even these fixes might not stem the torrent.

Hadas: This is no ordinary anti-crisis stimulus

18 Mar 2020

The usual reason to pump money into an economy is to increase economic activity. That’s not possible in the face of the Covid-19 pandemic. But maintaining incomes and solvency will allow fairer and fuller use of what’s available. The crisis is teaching the uses of solidarity.

ECB has a nascent euro zone crisis to head off

18 Mar 2020

The yield spread between German bonds and French or Dutch ones has suddenly widened. That, more than a blowout in the gap with Italy, was the sign in 2012 that markets were questioning the single currency’s future. ECB boss Christine Lagarde has little time to nip it in the bud.

Wall Street has $1.4 trln chance to amend for 2008

17 Mar 2020

That’s what big U.S. banks could lend using their excess capital. Tapping into what they’ve set aside to help in a crisis would yield more. Financial returns might not be great, but using their strength to bail out taxpayers in need would be an apt reversal of the last meltdown.

Commercial paper jam casts less menacing shadow

17 Mar 2020

The Federal Reserve is intervening in the $1 trln market that companies depend on for short-term funding. That should calm nervous investors and reduce credit line drawdowns that could stress banks. The central bank did the same in 2008. This fix is easier to execute.

Siren call of trading halts is entirely resistible

17 Mar 2020

The virus prompted the Philippines to shutter its bourse; U.S. SEC chief Jay Clayton says such moves are unnecessary. There are tempting reasons to temporarily freeze markets, which New York and others have done before. But the costs of closures exceed their fleeting benefits.

Fed will struggle to open discount window wide

16 Mar 2020

The eight biggest U.S. lenders are tapping the central bank’s emergency facility to help reduce its stigma. Ones that used the program during the financial crisis were publicly shamed. The likes of JPMorgan are setting a good example, but may not persuade smaller peers to follow.

Japan Inc set for stint on government dole

17 Mar 2020

The central bank will loan to banks at 0%, accepting corporate debt as collateral. The hope is that companies, propped up by cheap credit, will refrain from layoffs as growth contracts. The risk is that, true to form, they take the money and do little that helps.

Fed’s market fixes leave biggest problem unsolved

16 Mar 2020

Chair Jay Powell wants to ensure an ample global supply of dollars and avoid a repeat of last week’s U.S. bond market disorder. But measures like asset purchases will at best mitigate the stress. The root of tensions is the risk of companies going bust because of the coronavirus.

Chancellor: Monetary cure carries risk of its own

16 Mar 2020

Central bankers aren’t arguing that slashing rates and printing money will resolve the coronavirus panic. But the experience of the 1970s oil crisis suggests meeting a severe global supply shock with fiscal activism and easy money may bring inflation back in a nasty way.

Fed arsenal shows up White House peashooter

15 Mar 2020

The U.S. central bank slashed interest rates, increased government bond buying and made it easier for foreign firms to get dollars. It’s an impressive response to the Covid-19 crisis. But without fiscal stimulus or adequate public health remedies, the Fed can only do so much.

Yes Bank draws down Team India’s power

16 Mar 2020

Private institutions from HDFC to ICICI are joining a $1.4 bln state-led rescue of the troubled lender. There is self-interest in collectively trying to help restore systemic confidence. With more bad debt bound to turn up, though, it is also an early drain on limited resources.

Investors’ Brazil dream becomes nightmare

13 Mar 2020

The former market darling’s currency has shed over 16% of its value versus the U.S. dollar this year, and its stock market is among the worst-performing in the world. Its trade position is weakening. And neither Brazil's central bank nor its president have good policy options.

Christine Lagarde makes hard ECB job even harder

13 Mar 2020

A blunt remark by the European Central Bank chief drove up Italian bond yields - the last thing she wanted. She could get away with not knowing what pushes traders’ buttons when markets were placid. But that lacuna means she’s facing a crisis saddled with a credibility deficit.