Central Banks

Fed’s rate hike habit will be hard to kick

13 Jun 2023

The US central bank is mulling a pause after raising interest rates at its last 10 meetings. In this Exchange podcast, Morgan Stanley chief economist Seth Carpenter lays out the calculus behind the Federal Reserve’s next move, and why it’s so hard for policymakers to pivot.

Japan’s economic scars might blind it to inflation

13 Jun 2023

Central bank chief Kazuo Ueda has held rates low despite consumer prices rising well above his 2% target. Premature tightening has derailed Japanese growth revivals in the past. Yet, as recent Western examples show, procrastination can be a bigger risk to global markets.

Fork in rates road forces markets to get picky

9 Jun 2023

While the US Federal Reserve looks to halt monetary tightening, other central banks are still hiking. That ends a year-long trend of borrowing costs climbing in sync. As policymakers’ plans diverge, traders will need to work out each economy’s separate path and bet accordingly.

Stingy European savers will help the ECB, not LVMH

6 Jun 2023

Euro zone citizens have 1 trln euros in pandemic-era savings. Unlike their US peers, they are unlikely to splash the cash in malls and restaurants. That’s bad news for retailers and service providers, but it will help Frankfurt’s rate-setters slow the economy and cool inflation.

Pricey services are weary ratesetters’ last battle

1 Jun 2023

The rising costs of flights, restaurants and concerts are hampering central bank efforts to drag consumer price inflation back down to 2%. In the US the post-pandemic consumption boom is fading. In Europe and the UK, though, higher wages are prolonging the fight.

ECB’s crisis tool works best if it’s never used

30 May 2023

The European Central Bank is touting its powers to buy sovereign bonds if they come under attack from the market. That has kept traders in check, so far. The trick for Frankfurt officials is to convincingly threaten to deploy emergency measures without ever having to.

Central bankers face a balance sheet reckoning

26 May 2023

Assets held by central banks have exploded since 2008. As interest rates rise, some of those institutions are slipping into the red. We’re told normal accounting rules do not apply. However, losses erode inflation-fighting credibility and independence, argues Edward Chancellor.

Erdogan part three would be worse and the same

18 May 2023

The Turkish president is in a heated battle to lead the battered country. In this Viewsroom podcast, Breakingviews columnists discuss the risks Turkey faces if he stays in office, his rival’s offering and how the outcome of the election will impact the rest of the world.

Debt-ceiling talks are more theater than substance

16 May 2023

The few areas being discussed on Tuesday – food stamps and drilling permits - are hot political buttons. But they would shrink the deficit by only 2%. Lawmakers either have a long way to go to solve the debt problem, or they are favoring pet projects at the expense of insolvency.

Ukraine rebuilding would be small wager for Europe

16 May 2023

The Ukrainian economy shrank by 30% last year but the war didn’t break it. Reconstruction will cost $410 bln over a decade, according to the World Bank. The European Union could fund the bulk of those efforts by spending just 0.1% of annual GDP. That would be a shrewd investment.

BoE pioneers can make a virtue out of uncertainty

11 May 2023

The Bank of England is living a central bank nightmare. Inflation is 10.1% but growth is stalling. After hiking by 25 basis points, its best option is to avoid the playbooks of US and European peers, pause and be ready to loosen or tighten policy based on what the economy does.

Ukraine banks’ robust health masks big challenges

11 May 2023

After previous central bank reforms and an influx of deposits, the Ukrainian financial sector remains strong. But bad loans are at 38% and the three largest banks are state-owned. To support Ukraine’s reconstruction they will need more balance sheet cleanups, and privatisations.

Inflation’s real benefits beat theoretical costs

5 May 2023

A barrage of shocks have battered the world’s developed economies, leaving central bankers struggling to adapt. Allowing prices to rise not only eases the economic adjustment but shrinks big debt piles, argues Felix Martin. That’s helpful to everyone – except bond investors.

ECB risks interest-rate blunder after messy data

2 May 2023

The European Central Bank is none the wiser following a raft of new numbers. Lenders may be reining in credit, but headline inflation is rising. Hardliners will still push for a 50 basis point hike on Thursday. The uncertain conditions call for an increase half that size.

Orbán’s central bank attack is self-defeating

28 Apr 2023

Hungary’s premier has picked another fight with Europe by meddling with the country’s rate setter. That could complicate the release of over 10 bln euros of frozen EU aid. With sky-high inflation and zero growth, the autocratic leader may soon face a foreign investors’ strike.

Digital “Chicago Plan” fixes many financial woes

28 Apr 2023

In the 1930s, economists drew up a radical blueprint to create safer banks. The advent of digital currencies issued by central banks is an opportunity to revisit the idea, writes Edward Chancellor. A shift could stabilise banking, reduce inflation, and even lower government debt.

Dollar bulls are praying for a mild downturn

26 Apr 2023

The greenback has lost 14% versus the euro since September, as investors bet on Europe’s recovery and China’s reopening. Inflation and interest rate trends still favour the single currency. The best hope for the buck is a minor economic slowdown to boost its safe haven status.

China distrusts its retail recovery

25 Apr 2023

Officials are pushing banks to cut deposit rates after citizens stuffed $1.4 trln into accounts last quarter. Cash hoarding could sabotage a nascent shopping revival, but punishing savers with low returns is a clumsy way to boost consumption. It could backfire too.

Hong Kong’s dollar stress gets more fundamental

24 Apr 2023

The peg against the greenback is under mounting pressure; officials have run down reserves to a 15-year low defending it and they can keep going. But only part of the currency weakness is speculative. The trend highlights worries about the Asian hub’s long-term economic future.

Aussie central bank prepares to join 21st century

20 Apr 2023

Canberra intends to implement all 51 proposals of a review into its interest-rate setting institution. That’ll improve everything from governance to communications to independence. Whether Philip Lowe stays in charge, though, hangs in the balance.