Federal Reserve

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.

Central bank schism is bad news for bunds

22 Dec 2022

Markets reckon the Federal Reserve will stop hiking rates before the European Central Bank. That has pushed yields on 10-year German bonds closer to those of U.S. Treasuries. The trend will last in 2023, as sticky euro zone prices and a fiscal splurge pressure Berlin’s debt.

Central bankers will shift inflation goalposts

19 Dec 2022

The Federal Reserve, ECB and others insist they’re determined to get price increases back down to 2% a year. Though the target is arbitrary, changing it is tricky. But stubborn inflation means monetary authorities will have to find ways to tolerate rising prices for longer.

Lack of trust leaves markets at odds with the Fed

14 Dec 2022

The Federal Reserve rankled investors this year after it misjudged inflation. Markets have since ignored the central bank’s comments and bet on rate cuts in 2023. Yet the Fed continues to say it will hold rates high. The longer the two disagree, the more investors stand to lose.

Bank of England inflation fight easier than Fed’s

24 Nov 2022

An OECD study shows supply shocks are pushing up American prices, while strong demand is a bigger factor in the UK. That makes BoE Governor Andrew Bailey’s task more straightforward than Fed Chair Jerome Powell’s. For Britain, though, price stability will deepen economic woes.

Capital Calls: Fuzzy Fedspeak, Dr. Martens

24 Nov 2022

Concise views on global finance: The U.S. central bank has left traders guessing the meaning of the word “various”; shares in the recently listed British bootmaker fell 20% after sales missed expectations, and a warning that its investment needs will hurt profitability.

Fed gets credit for providing perpetual angst

8 Nov 2022

Investors in Asia are overreacting after a South Korean issuer flipflopped on a decision to exercise a call option on a $500 mln bond. Liquidity measures from Seoul eased an earlier rout but pressure from U.S. rate hikes is turning boring corners of finance into something hot.

Bernanke bank-crisis Nobel requires markets sequel

10 Oct 2022

The former Fed chair and two fellow economists won the prize for showing how lenders can fail and cause a depression. Bernanke put theory into practice in 2008, averting a slump. But ultra-low interest rates built up financial risks which are only now becoming fully apparent.