Central Banks

Goldman’s new durability message cuts two ways

16 Jan 2024

After failing in consumer finance, the investment bank wants to emphasize the predictability of its existing businesses. Boss David Solomon makes a good case that a chunk of revenue is more reliable than it once was. And yet arch-rival Morgan Stanley generates even more of it.

Mega-banks menaced by closing jaws in murky waters

12 Jan 2024

JPMorgan, BofA, Citi and Wells Fargo all unveiled financial results clouded by exceptional items and less predictable outlooks. Bad-debt costs are up and interest rates are probably coming down. Cutting expenses relative to revenue, or “positive jaws,” will be a 2024 fixation.

BoE can counter banks’ unfriendly rate fire

12 Jan 2024

UK lenders like HSBC think lower borrowing costs are coming and have slashed five-year mortgage payments below 4%. That makes it harder for the Bank of England to slay inflation and, in fact, may delay any cuts. Governor Andrew Bailey could ask the City to reward savers as well.

Imperial dollar is impervious to lower rate hopes

9 Jan 2024

In theory, the currency should weaken as the Federal Reserve readies to cut borrowing costs. But it is up 1% in 2024 and just had its best week since July. The US economy’s resilience is one reason. But the greenback’s strength also becomes a perpetual problem for everyone else.

Bond deluge will nudge ECB to softer rate stance

4 Jan 2024

European countries’ fiscal needs and the end of central bank buying mean a record 675 bln euros of sovereign debt will be on sale in 2024. That may keep borrowing costs high for states like Italy. ECB President Christine Lagarde can help by meeting investor hopes for swift cuts.

Convertibles will be 2024’s hot financial model

2 Jan 2024

Hybrid bonds, which fueled hedge fund billionaire Ken Griffin’s rise, sputtered after a $370 bln Covid-era boom. Refinancing needs are revving them back up as interest-cost savings lure new issuers like Duke Energy. New features should tempt investors to ride off with them again.

Dear Chancellor: inflation will fall…when it falls

28 Dec 2023

Bank of England Governor Andrew Bailey has to write to the UK finance minister when consumer price growth is above or below 2%. Yet it’s clear mere central bankers can’t influence the behaviour of people or firms. Breakingviews imagines a letter in 2024 which says as much.

Russia’s economy will suffer from brawl at the top

18 Dec 2023

The CEO of state-held oil major Rosneft slammed the central bank’s high interest rates. President Vladimir Putin has long thrived on tensions between hardliners and the few remaining technocrats. But with Moscow in permanent crisis mode, the high-level conflict spells trouble.

Policymakers take divergent paths toward rate exit

14 Dec 2023

Central banks in Europe and the US left borrowing costs untouched this week. But the latter went a step further and unexpectedly promised cuts. In this Viewsroom podcast, Breakingviews columnists explain how ratesetters, who were slow to tackle inflation, could be laggards again.

Powell was pragmatic; Lagarde will have to be

14 Dec 2023

The European Central Bank, like the US Federal Reserve, left its rates unchanged. But unlike Fed Chair Jay Powell, ECB boss Christine Lagarde didn’t imply that lower inflation meant looser monetary policy. A slowing economy and abating price pressures will push her there in 2024.

Last word of 2023 goes to Jay Powell

12 Dec 2023

Investors are pricing in 1 percentage point of US rate cuts next year. The Federal Reserve doesn’t want that, so its chair needs to talk up inflation on Wednesday. If markets keep ignoring him, rallies in stocks and bonds will continue, but the central bank’s job will get harder.

BoE is a more credible rate-cut sceptic than ECB

12 Dec 2023

Policymakers in London and Frankfurt are unlikely to touch borrowing costs this week. Their challenge is to persuade markets they are not about to start slashing them. Bank of England Governor Andrew Bailey has the easier task, but only because the UK is in worse economic shape.

Central bank blunders undermine tough rate talk

5 Dec 2023

Federal Reserve Chair Jay Powell and his peers say borrowing costs will stay high to curb inflation. Markets are ignoring them, pushing bonds to their biggest monthly gains since 2008 on hopes of easier policy. Past mistakes by policymakers suggest traders' scepticism is correct.

Bank of England drags Bagehot into the shadows

1 Dec 2023

The 19th-century economist recommended lending freely to stem financial panics. Now watchdogs are pondering how to apply this principle to financial markets dominated by bond investors and unregulated entities. The UK central bank has an idea, but it only works in some cases.

Forex swings will upend lucrative yen carry trade

1 Dec 2023

Investors who borrowed Japanese currency and invested in dollars or, even better, Latin American assets, have been enjoying big returns. Yet expected changes to monetary policy in the US and far east point to more volatility. Bets on diverging interest rates will get riskier.

The future of interest rates is more surprises

24 Nov 2023

The return of inflation surprised central banks which until recently predicted rates would remain “lower for longer.” Economists and investors struggle to agree on what has changed or what will happen next. Those who assume current interest rates are normal may be in for a shock.

Labour is weak link in Israeli economic defences

14 Nov 2023

The Middle Eastern country has withstood the financial pain of a war with Hamas, William Wechsler at the US think tank the Atlantic Council says in this Exchange podcast. But as the conflict continues, an increasing labour shortage will pile pressure on the economy.

Hong Kong finance summit tiptoes around China

9 Nov 2023

Executives from Apollo’s Marc Rowan to UBS’s Colm Kelleher gathered in the Asian city to debate markets, debt and regulation. Yet few mentioned slow growth and slumping real estate across the border. For firms straddling the geopolitical divide, some topics are best avoided.

Japan’s rates tweak is careful and crafty

2 Nov 2023

The central bank changed its policy to allow higher 10-year bond yields. Unlike the US, it can afford to raise borrowing costs slowly as inflation is low. In this Viewsroom podcast, Breakingviews columnists explain why monetary tightening as others loosen may give Tokyo an edge.

BoE’s tough talk on rates ignores weak homeowners

1 Nov 2023

The Bank of England is set to keep borrowing costs steady this week but insist they will stay high to curb inflation. That may be hard, given the sick housing market has yet to feel the pain of past hikes. The UK may ease policy sooner than its peers will, and the market expects.