Federal Reserve

Fed makes inflation fight Joe Biden’s problem

21 Sep 2022

The central bank raised rates by 75-basis-points and suggested they could go higher than expected without a hard landing. That seems overly rosy. But inflation could do more harm than a recession – and if the Fed overshoots, it’s the man in the White House that carries the can.

Powell gives markets tough medicine they needed

26 Aug 2022

The Fed chair’s Jackson Hole speech came with a blunt message: The U.S. central bank will tame inflation by hook or by crook. That’s a dose of reality for investors searching for dovishness. It’s convincing households and businesses that really matters now.

Powell’s inflationary wrong could turn out right

25 Aug 2022

The Fed chief’s upcoming speech at Jackson Hole may skew hawkish, to make up for him dismissing rising prices too readily at last year’s confab. His mistake, though, protected the U.S. economy from rate hikes that would have hurt growth. By being late, the Fed may do less harm.

Dollar snares U.S. firms in $4 trln endurance test

29 Jul 2022

The rising greenback is eating into profits and stock prices, owing to the roughly 30% of U.S. companies’ revenue that comes from overseas. Even so, the Fed and White House have tended to let the dollar do its thing. What investors lose today, they’re likely to regain tomorrow.

Powell can afford to lose macro popularity contest

27 Jul 2022

The Fed’s biggest rate hikes in 41 years could push the U.S. into a recession. But unlike some previous central bank chiefs, Powell’s ample political capital gives him cover to be single-minded in fighting inflation. Fear of a future downturn is unlikely to hold him back.

Euro weakness forces itself on ECB’s agenda

12 Jul 2022

The single currency is nearing parity with the dollar for the first time in 20 years. It’s due to the U.S. economy’s strength and fears of a continental gas crisis. It also reflects the European Central Bank’s late response to inflation, which a weak euro makes harder to fight.

Hong Kong banks are slow to gain from rate rises

7 Jul 2022

The Asian hub must track the Fed’s rate hikes to preserve its currency peg, but commercial lenders can’t follow so quickly. That reflects China’s weak growth and long term, the awkwardness of the 39-year-old system. Near term, it’s a profit drag for HSBC and Standard Chartered.

Job losses add turbulence to Fed’s softish landing

24 Jun 2022

The central bank reckons taming inflation means doubling interest rates and unemployment rising to 4.1% in 2024. Yet it expects GDP to keep growing despite the loss of about 1 mln jobs. Even if the Fed is right, the risk is that cooling consumer confidence squashes growth.

Capital Calls: Bank stress tests, Japan inflation

24 Jun 2022

Concise views on global finance: U.S. lenders passed the latest Federal Reserve capital exams, but they’re bound to be more stressful next time; the country’s consumer prices rose 2.1% in May, intensifying a standoff between the central bank and bond investors.

Central banks still have space to fight inflation

15 Jun 2022

Jerome Powell and Christine Lagarde are tightening monetary policy to try to control soaring prices. Previous shocks have prompted the Fed and ECB chiefs to pause or loosen again. Despite plunging equity prices this time, calmer credit markets imply the “Fed Put” is far off.

Consumers are the next transitory guessing game

27 May 2022

Central bankers and investors spent months debating whether inflation was here to stay. Now that mystery applies to the financial state of Americans, who are glum about the economy but still spending. It’s a problem for the Fed, but consumers might just have staying power.

Inflation revives spectre of the long bear market

19 May 2022

The S&P 500 Index has fallen almost 20% from its early January peak. Such downturns have become shorter and less frequent due to support from the Federal Reserve, says Edward Chancellor. But rising prices have removed the safety net. The next selloff could inflict more damage.

Chelsea’s generous buyer, U.S. inflation pain

12 May 2022

Roman Abramovich is selling the soccer team to a group led by LA Dodgers co-owner Todd Boehly for $3 bln. In this Viewsroom podcast, Breakingviews columnists discuss the chunky valuation and the owner’s spending plans. Also, high prices are hitting the rich as well as the poor.

Fed manages to hurt both rich and poor

10 May 2022

Past tardiness in tackling surging inflation means low-income U.S. households face huge increases in the cost of living. Now, Fed Chair Jay Powell may have to hike rates so much that growth falters – a prospect hitting stocks and richer households’ net worth. Misery has company.

Selloff shows China’s lack of investment traction

6 May 2022

U.S.-listed Chinese stocks underperformed during Thursday’s New York bloodbath, tumbling 8%. Beijing still hasn’t convinced global funds it’s more than just another volatile emerging market. Slowing growth and an inflationary environment will make it hard to change their minds.

Andrew Bailey unwillingly channels Paul Volcker

5 May 2022

The Bank of England boss raised rates to 1% to curb high inflation and may hike further despite the risk of recession. It’s old-school policymaking as practised by the former Fed chief. The more central banks behave this way, the more likely and severe a global downturn will be.

Fed jumps into field of financial land mines

4 May 2022

The American central bank has little choice but to hike interest rates and cut its balance sheet to fight inflation. But Chair Jay Powell’s moves make the $24 trln U.S. Treasury market more vulnerable to shocks. Bigger future increases could even tip the U.S. into recession.

Explaining the Fed’s tolerance for high inflation

21 Apr 2022

U.S. prices are rising by more than 8% a year, yet the central bank only just started raising interest rates. One possibility is that it fears a financial crisis, Edward Chancellor argues. Another is that inflation is the least painful way to resolve deep-seated social conflicts.

Fed’s 5-year balance sheet plan may be interrupted

7 Apr 2022

The U.S. central bank aims to reduce its $9 trln of assets by $95 bln a month. At that pace, even already fat pre-pandemic levels might not be reached until early 2027. That's a long time in economics, and in politics. Like the last attempt to slim down, it risks being thwarted.

Christine Lagarde’s inflation excuses wear thin

1 Apr 2022

Euro zone prices rose at a record annual rate of 7.5% in March, almost as much as in the United States where the Fed has started hiking rates. There’s more going on than just surging energy costs. It’s getting harder for the European Central Bank boss not to follow Jerome Powell.