Federal Reserve

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.

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.

Fed’s SVB review finds there’s no “I” in “blame”

28 Apr 2023

Its postmortem of the collapse of SVB Bank calls out timid supervisors, loopholes that made it hard to keep tabs on fast-growing firms and previous vice chair Randal Quarles’ push to cut red tape. The result is a prescription for lots of change, but not much accountability.

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.

Fed can find inflation silver lining in bank storm

14 Apr 2023

Financial turmoil has prompted lenders to tighten the purse strings. That helps the Federal Reserve to cool the economy but might starve firms of funds. The central bank can spend up to $3 trln to combat a credit crunch without lifting consumer prices. It may need a lot less.

Central bank pilots risk leaving cockpit too soon

14 Apr 2023

Western policymakers at the IMF Spring Meetings hinted that their mission to slay inflation without a recession is nearly accomplished. Investors agree, and hope for rate cuts. That’s overdone. A soft landing is in sight, but so too is the danger of complacency.

A top tip for central banks: talk less, smile more

11 Apr 2023

Investors’ obsession with policymakers’ hints about future interest rate movements is fueling market volatility. As bank failures and inflation upend forecasts, officials can take a more muted approach. It will help them steer the economy without disturbing financial stability.

Powell is leader of the free world – for now

28 Mar 2023

The Federal Reserve chair has ever-larger powers and responsibilities. If he raises rates, he could spark a banking crisis and complicate Joe Biden’s re-election bid. If he lets up, prices will stay high. Powell may stay the course, but Biden isn’t going to like it.

Market nerves tie US rate-setters’ hands

22 Mar 2023

The Federal Reserve's quarter-point rate hike was the best it could do without creating other issues. Higher rates put more stress on banks, but investors expected such a move. Chair Jay Powell might not like following behind markets, but nor can he afford to surprise them.

Fed’s self-scrutiny starts off on the wrong foot

22 Mar 2023

Supervisory tsar Michael Barr is leading a probe into Silicon Valley Bank’s collapse. But the Federal Reserve’s tangled, partly centralized structure makes it ill-suited to conduct a warts-and-all review of its supervision. Banks don’t police themselves; the Fed shouldn’t either.

Fed can follow ECB, BoE on monetary tightrope

21 Mar 2023

Bank failures and high inflation complicate the US Federal Reserve’s interest rate decision on March 22. Its Western peers have shown how to fight rising prices while aiding financial stability. Taking the road more traveled would also ease traders' fears of new crises.

Where is Silicon Valley’s J. Pierpont Morgan?

17 Mar 2023

JPMorgan chief Jamie Dimon channeled his predecessor by corralling fellow bank CEOs to support First Republic. Financiers band together, even with regulators, when the going gets tough. Silicon Valley, more fragmented and libertarian, lacks such a savior. That could change.

US jobs data can spare Fed rate ratchet

10 Mar 2023

A larger-than-expected gain of 311,000 jobs might stoke inflation-fighters’ fears, but slowing wage growth and returning workers show a labor market in the sweet spot. That gives policymakers weighing further hikes in borrowing costs the opportunity to take a patient approach.

Powell leads markets on a needlessly wild ride

8 Mar 2023

Until February, investors believed the Federal Reserve chair would soon relax his fight against inflation. His Tuesday testimony to the US Senate has left them with the opposite impression. Just because Powell is prepared to bring out the big guns doesn’t mean he will have to.

Fed’s reluctance to go green will cost the Earth

7 Mar 2023

Unlike the European Central Bank, the U.S. Federal Reserve doesn’t want to fight climate change. That’s an expensive mistake. Global spending to hit net-zero emissions could reach $275 trillion by 2050. The Fed’s tools could reduce that price tag and curb future inflation.

“No landing” talk leaves stocks in no man’s land

6 Mar 2023

Bond investors worry that strong economic data will keep borrowing costs high. That’s pushed yields on 10-year German debt to an 11-year high. Yet buoyant equity markets are pricing in a dream scenario of faster growth and falling interest rates. They are in for a rude awakening.

How central banks got the inflation crisis wrong

14 Feb 2023

Western policymakers have hiked interest rates by more than 10 percentage points since 2021. Yet prices remain high. In this Exchange podcast, Paul Donovan, chief economist at UBS Global Wealth Management, explains how rate-setters failed and what they should do next.

How investors can profit from Fed-ECB divergence

7 Feb 2023

As America flirts with a recession, the U.S. central bank is set to stop tightening as interest rates near 5%. That will leave ECB President Christine Lagarde as the West’s most hawkish policymaker. The transatlantic split is an opportunity for traders who bet on European assets.

Markets gulp down central banks’ half-full glass

2 Feb 2023

Three of the world’s most prominent central banks raised interest rates to multi-year highs this week. Investors loved it, reading the decisions as the beginning of the end for monetary tightening. Policymakers, and stubborn inflation, might prove them wrong.

Fintech fight tests Fed’s transparency mission

19 Jan 2023

The Federal Reserve will soon disclose which firms it approves for valuable master accounts. It’s the latest in the central bank’s push toward greater transparency, but change has been slow. Fintechs seeking master accounts of their own will check the Fed’s sincerity.