Federal Reserve

Fed’s failure to communicate overshadows QE debate

30 Jan 2020

The U.S. central bank has been gobbling up about $60 billion in treasury bills a month since October. Whether this is technically quantitative easing is less important than the Fed’s struggle to control its message. This could undermine its effectiveness when it’s needed most.

Strong U.S. equity returns tell wrong story

13 Jan 2020

The S&P 500 Index rose roughly 30% in 2019, even as over $180 billion drained out of U.S. equity funds. This bumper return is mostly down to falling interest rates – with some help from around $735 billion in stock buybacks. Investors ought to watch flows, not just prices.

Hotter inflation is the best surprise to hope for

2 Jan 2020

The absence of much price pressure is a head-scratcher for the Fed given the tight U.S. labor market. It’s behind debilitating negative interest rates in Europe and Japan. It’s a problem for pension funds, insurers, savers and banks. A mild return would be unexpected but welcome.

Viewsroom: Jack Dorsey’s heroic year ahead

19 Dec 2019

From banning political ads to developing cryptocurrency plans, the CEO of Twitter and Square has been politically more astute than rivals like Facebook. That sets him up for a good 2020. Also: the different ways that shareholders, the Fed and M&A bankers will tackle climate risk.

Jay Powell has golden chance to avow independence

18 Dec 2019

The Fed boss can distance himself from President Donald Trump by nudging the U.S. central bank to join a global green network that already includes 51 peers. This will defuse criticism that he has been too malleable on rates. And it may even help to save the planet from frying.

Now we’ve lost Paul Volcker, we must find another

9 Dec 2019

Opposed by politicians and economists, the former Fed chairman raised interest rates, overcoming inflation in the 1980s. A great central banker needs monetary policies that fit their time as well as rarer qualities like determination and integrity. Volcker had both.

Fed’s stability is an appreciating asset

20 Nov 2019

Ambassador Gordon Sondland implicated not just President Donald Trump, but also the vice president and secretary of state in the House impeachment probe. The central bank’s independence should comfort investors – unless Trump starts threatening Chair Jay Powell’s job again.

Fed cut is over-stuffing the cushion this time

30 Oct 2019

Another interest-rate reduction is what traders wanted. But U.S. stocks just hit a record high, the economy is chugging along with solid – if not spectacular – growth, and inflation has crept up. The Fed’s touted data dependency is looking more like addiction to the markets drug.

Breakdown: Fed needs adaptable repo response

8 Oct 2019

Chairman Jay Powell says the U.S. central bank will start buying bonds again to help ensure money markets stay well behaved. The Fed has learned a tough lesson from last month’s spike in repo rates: exiting the era of quantitative easing isn’t going to be easy.

Fed wrestles the unpredictable and the unintended

18 Sep 2019

Cutting interest rates again was the easy part. The whimsical trade policy of President Donald Trump and threats to oil supplies call for insurance. But stress in money markets is partly the U.S. central bank’s own handiwork. Chair Jay Powell is discovering the Fed’s new normal.

Money-market wobble is whodunnit without a villain

17 Sep 2019

The U.S. Fed pumped in $53 bln to calm interbank lending after rates spiked. The movements were dramatic, but the many causes look mostly mundane. Banks might use the ructions to argue they deserve a regulatory break. Such ripples, though, can be tolerated, and may have to be.

Bill Dudley blows the U.S. central bank’s cover

28 Aug 2019

The ex-New York Fed boss proposed monetary-policy resistance to Donald Trump’s trade war. To be fair, the president exploded norms first. Yet Dudley, though now a private citizen, has weakened the Fed's apolitical credentials. It paints Chair Jay Powell further into a corner.

Fed chief crafts central banker’s serenity prayer

23 Aug 2019

Jay Powell hopes to control what he can and rise above what he can’t. His speech at Jackson Hole highlighted trade battles, which he can’t influence, as a new challenge for rate-setters. But his tone suggests more willingness to weigh policy threats when shaping monetary policy.

Jerome Powell finds another way to please nobody

31 Jul 2019

The Fed chief presided over a quarter-point interest-rate cut on Wednesday, disappointing investors, presumably the president, and even some colleagues. Most people have enough worries, real or not, to want lower borrowing costs. Most economic statistics, though, say not yet.

New breed of central bankers is harder to read

11 Jul 2019

Jerome Powell at the Fed and Christine Lagarde, nominated to be the next ECB chief, are lawyers by training. Their thinking is more fluid than predecessors whose economic tenets informed a world view. That has benefits, but also means it’s harder to predict how they will react.

Hadas: Bond markets lost in inflation-growth gap

10 Jul 2019

Changing growth expectations explain most daily movements in bond prices, while falling inflation parallels the long-term trend of declining yields. Every so often, however, market gyrations reflect hopes that growth and inflation will reconnect. There’s little sign of that.

Trump’s latest Fed picks at least clear the bar

3 Jul 2019

Christopher Waller is a U.S. central bank insider. Judy Shelton is more of a maverick with her liking for the gold standard. Yet her business background might usefully add to debate at the Fed. They’re an improvement on the partisan hacks Trump offered up last time around.

Bank payout party is a lavish but sober affair

28 Jun 2019

JPMorgan, Goldman Sachs and large peers plan to hand $150 bln back to shareholders this year. Jumbo payouts were once a sign of excess profit. Now they show a lack of alternatives. Yet an old incentive is unchanged – buybacks’ ability to juice profit per share.

Buybacks prolong Wall Street rally nobody loves

20 Jun 2019

U.S. stocks are near record highs – thanks in part to purchases by their issuers. Investors are pulling out of equities and fund managers report extreme bearishness amidst a weakening global economy. Hopes of Fed rate cuts are a fragile support when it’s the only game in town.

Fed gives data one more chance

19 Jun 2019

The U.S. central bank held rates steady, though no longer says it’s patient. Policy setters are up against weaker global growth, trade worries, more dovish signals from Europe and Japan, market hopes of rate cuts and Donald Trump’s brickbats. The tension may last only six weeks.