Federal Reserve

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.

Markets may do Powell’s job for him

24 Mar 2022

The U.S. central bank chair is speaking aggressively about rate hikes. The Eurodollar yield curve implies it will lead to swift increases that will then be cut. Investors and companies respond to expectations by trimming spending and investing. That makes the Fed’s task easier.

Fed board flame-out still leaves banks on thin ice

16 Mar 2022

Sarah Bloom Raskin’s failure to clinch the supervisory lead role at the central bank proves what was already clear: only a centrist who avoids divisive issues like climate can get approval from a divided Senate. But while Big Oil may be off the hook, Wall Street probably isn’t.

Biden’s bungled Fed pick symptom of larger disease

16 Feb 2022

The U.S. president’s central bank nominee is a climate stalwart, prompting Republicans to boycott a vote. A pattern of drafting political candidates for non-partisan outfits, like the FTC, is emerging. It’s counterproductive and can also widen agency mandates in dangerous ways.

Soaring prices warrant bigger Fed rate hike

10 Feb 2022

U.S. inflation hit a 40-year high of 7.5% in January. Broad-based increases in costs and a robust jobs market give the central bank ample justification to hike rates by half a percentage point, rather than a quarter, and show that it’s serious about tackling price pressures.

Guest view: Fed hikes spell emerging-market strain

4 Feb 2022

Poorer indebted economies face growing difficulties as the U.S. Federal Reserve signals its readiness to raise interest rates. William Rhodes, former president of Citibank, and economist Stuart Mackintosh lay out what creditors, borrowers and the IMF can do to avert a crisis.

Big Oil elbows out banks as Fed’s new kingmaker

3 Feb 2022

The energy sector has come out swinging against Sarah Bloom Raskin, President Biden’s pick to lead supervision at the U.S. central bank. The ex-Fed governor is outspoken on climate risks. The business lobby could frustrate her confirmation, even with Democrats in Senate control.

The Exchange: San Francisco Fed boss Mary Daly

1 Feb 2022

U.S. inflation is at its highest in four decades. The central banker explains to Swaha Pattanaik how the Federal Reserve plans to tackle price pressures without jeopardising growth or job creation, and outlines her views on the outlook for monetary policy.

Jay Powell embarks on difficult Goldilocks act

26 Jan 2022

The Fed boss is likely to signal rates will start rising in March to curb inflation. The robust economy can cope with that as well as the three other hikes that investors expect him to deliver before year-end. Anything more will leave little room to deal with economic hiccups.

IMF’s economic crystal ball is cracked

25 Jan 2022

The Washington-based lender slashed global growth forecasts and hiked inflation predictions. The IMF has been too late to admit that Fed policy tightening is needed. That’s damaging for an institution that doles out economic advice and monitors financial stability risks.

Christine Lagarde will win rate rise timing tussle

19 Jan 2022

Money markets imply the European Central Bank will hike twice this year, even though its boss says policy tightening is unlikely in 2022. She will have to work hard to convince markets, but reason is on her side. Wage pressures are less evident in the euro zone than in America.

Banks’ rate-rise rewards may be bigger than ever

17 Jan 2022

Deposits at large U.S. lenders are up by a third since 2019 to $11 trln. They’ve stashed much of the cash in central-bank reserves, which immediately earn more as rates go up. Tighter monetary policy usually helps banks, but especially so given their current mix of assets.

Stressed Beijing will buck Fed’s tightening trend

17 Jan 2022

China's reported output grew 8.1% in 2021, well above target, but activity slowed sharply at the end of the year. Monetary easing has been restrained by debt concerns, but the central bank surprised markets with a rate cut on Monday. Low inflation and a strong yuan give room for more.

Biden’s bank cop choice will draw heat

14 Jan 2022

The U.S. president named Sarah Bloom Raskin to lead supervision at the Federal Reserve. She has slammed watchdogs as laggards on climate risks. The Fed has downplayed tying bank capital reserves to global warming. But if Raskin gets through the Senate, that could become a goal.

Central banks will give risky debt a helpful shock

13 Jan 2022

Benchmark bond yields are rising as rate-setters around the world scale back asset purchases. That will reduce the appeal of corporate debt, but a correction in credit markets is nothing to fear. A setback may lead to less hazardous terms for bondholders, and a rout is unlikely.

Trailblazing UK rate rise may pay off in the end

16 Dec 2021

The Bank of England is the first major central bank to hike its policy rate. The ECB faces less acute price pressures and the Fed must consider the job market alongside inflation. It’s a gamble, but acting now means British rate-setters will have less hiking to do in the future.

Inflation genie will be hard to banish

10 Dec 2021

Consumer prices will rise at a less hectic pace in 2022. But they’ll still overshoot targets that Fed Chair Jay Powell and his peers aim to hit. Policymakers are less apt to hit the brakes on stimulus than in years past. Also, businesses and workers are behaving differently.

Transitory isn’t the only thing Fed should retire

30 Nov 2021

Chair Jay Powell reckons it’s time to stop using this adjective to describe current high inflation rates. That’s welcome, if overdue. Rate-setters could also usefully retire forward guidance. In such uncertain times, it’s counterproductive to appear to commit to a policy path.

Omicron may give inflation a chance to bed in

29 Nov 2021

The new coronavirus variant could ease short-term price pressures if it triggers wider lockdowns that curb consumption. But if it prolongs supply-chain problems the reverse will be true in the longer term. Especially if cautious central bankers delay tightening monetary policy.