Federal Reserve

Yellen swan song could presage Wells CEO’s

2 Feb 2018

The Fed chief used her last day in office to slap a restraining order on the $2 trln U.S. bank. It’s mostly a symbol, and a late one: boss Tim Sloan has already started to clean up the company's act. But the Fed action could persuade Wells' new chair that it’s time for a change of leader.

Bond market tightening complicates Powell’s task

31 Jan 2018

U.S. Treasury yields rose to near four-year highs even as the Fed left policy unchanged at Janet Yellen’s last meeting. A fresh growth spurt and worsening deficit outlook pose challenges for successor Jerome Powell. Hiking in a rising-rate environment is riskier for the economy.

Fed’s inflation-target rethink dodges big question

29 Jan 2018

Some U.S. rate-setters wonder about their 2 percent goal – both its level and whether it’s more a ceiling or a long-term average. The debate is welcome but could be even more radical. Today’s real issue is whether central bankers can fully explain, let alone control, inflation.

Mnuchin and Dudley exemplify a political dilemma

12 Jan 2018

The U.S. Treasury secretary, contradicting forecasts, expects tax cuts to pay for themselves. The New York Fed chief fears growing deficits and debt. Republicans may nod to the former but enough probably worry about the latter to hamper new outlays on infrastructure and the like.

Tight U.S. labor market may finally move Fed

5 Jan 2018

December’s relatively weak jobs and wage growth gives policymakers a breather. But with 2.1 mln positions created in 2017 and unemployment historically low, long-awaited pay increases - along with new tax cuts - could soon start stoking inflation. That would force the Fed’s hand.

U.S. junk bonds are time bomb with a long fuse

29 Dec 2017

Low default rates, a lack of alternatives and foreign demand will support high-yield bonds in 2018. Yet with spreads near record lows, covenants weak and leverage rising, the seeds of a bear market are plentiful. Investors should keep a wary eye for the first shoots of trouble.

U.S. banks get the hang of dying in living wills

19 Dec 2017

Watchdogs cleared the resolution plans of the eight biggest firms though four, including Wells Fargo, need improvements. It’s a far cry from 2016, when five failed outright. It’s progress not just because banks are safer, but because they finally understand what regulators want.

Yellen’s fine legacy gives way to uncertain future

13 Dec 2017

With her fifth and final rate hike, the Fed boss has put monetary policy on a path to normalization without spooking markets or hurting growth. Her successor may not be so fortunate. As the central bank gauges potential tax cuts and trade wars, its moves become less predictable.

Fed forecasts just enough sunshine for stress tests

7 Dec 2017

The central bank wants to provide more information about its models for loan losses and other inputs in the annual exams. That would suit lenders who complain the process is too opaque. But the Fed would retain some mystery, striking a balance that boosts the test’s credibility.

Yellen gives Congress parting shot on growth, debt

29 Nov 2017

The outgoing Fed boss warned of growing deficit risks just as lawmakers weigh tax cuts that would exacerbate it. It’s also up to politicians to improve education, investment and infrastructure spending. Her message of central bank limitations is one her successor will echo.

Fed chair pick shows mastery of central-bank arts

28 Nov 2017

Jerome Powell breezed through his Senate confirmation hearing with Zen-like confidence. He dodged the tax-reform debate, kept rate-hike comments predictable, backed Fed independence and defended its bank-rules review. The prospect of post-Yellen stability will please markets.

Bankers’ rule-change wish list starts in the weeds

24 Nov 2017

Executives have plenty of regulations they want a more industry-friendly Fed to overhaul. But for many the top target is an obscure supervisory letter that has turned often minor infractions into roadblocks for everything from new branches to M&A. It’s unnecessary red tape.

Fed eggheads scramble online-loans takedown

22 Nov 2017

Analysts at the central bank’s Cleveland unit had to pull a study claiming peer-to-peer lending was highly risky after its data was questioned. It’s a tricky sector to define and worsening consumer credit is a concern. But the Fed’s hasty conclusion tarnishes its own reputation.

Powell’s mystery Fed board poses continuity risk

20 Nov 2017

As expected, Janet Yellen will leave the U.S. central bank when her successor takes over. Jay Powell will inherit a skeleton board in need of four more Trump appointees. The lack of holdovers, amid a pivotal shift away from crisis-era policies, could make for a bumpy transition.

Sorry is the hardest word for central bankers

16 Nov 2017

Bank of England Chief Economist Andy Haldane says rate-setters should speak simply and honestly to the public. The first is easier than the second. Admitting past mistakes or doubts about the present is tough for institutions whose clout depends on an aura of omnipotence.

Central bankers go self-referential on rhetoric

14 Nov 2017

Fed Chair Janet Yellen and other top rate-setters took the stage in Frankfurt to discuss how they communicate. It’s a slightly meta admission of the role speechifying has come to play in monetary policy in an era of ultra-low interest rates. But wordiness brings its own perils.

New York Fed needs a new boss with teeth

6 Nov 2017

William Dudley is set to retire as president of the regional watchdog, which has day-to-day oversight of large lenders like Deutsche Bank and Goldman Sachs. As Washington leans toward deregulation, Dudley’s successor will be the first line of defense in ensuring banks behave.

Carlyle clinches takeover of top Fed jobs

2 Nov 2017

Jerome Powell, the nominee to lead the U.S. central bank, is an ex-private equity partner. So is vice chair Randal Quarles. Carlyle co-founder David Rubenstein is a D.C. fixture, but for a while the firm tried to shed its politically connected image. Now it's unavoidable.

Review: The myth of Federal Reserve independence

20 Oct 2017

America’s central bank is notionally free from the executive and legislative branches. A new book by Sarah Binder and Mark Spindel argues the Fed’s actions are constrained by politics. The trouble is that politicians don’t exercise their "money power" responsibly.

Taylor-led Fed would be dangerous in manifold ways

19 Oct 2017

In addition to the Stanford economist's dogmatic bent for a programmatic monetary policy, John Taylor backs bigger regulatory changes than others in the running to be the next U.S. central bank chief. His laissez-faire ideas about policing Wall Street are loaded with risk.