Inflation

Reluctant rate cut leaves the BoE with a lot to do

1 Aug 2024

The Bank of England lowered borrowing costs to 5% – its first such move since the pandemic. But division in its ranks and Governor Andrew Bailey’s cautious tone imply further easing will be slow. Given the fall in inflation, that will unnecessarily crimp Britain’s weak recovery.

UK ratesetters can stop worrying and start cutting

31 Jul 2024

Markets are split on whether the Bank of England will lower borrowing costs from a 16-year high of 5.25% on Thursday. Governor Andrew Bailey worries about services prices, wages and growth. But a glimpse into the future shows that those bugbears are less scary than they look.

Consumer titans have Covid-era issue, in reverse

26 Jul 2024

In the pandemic, Nestlé and Unilever’s higher prices were accompanied by falling sales. Now they are tempting consumers to buy more products, but prices are harder to budge. One issue hasn’t changed: the giants’ vulnerability to cheaper and healthier eating habits.

Inflation teaches five lessons for the next crisis

16 Jul 2024

After taming a 9% rise in prices without breaking economies, US Fed Chair Jay Powell and other central bankers are poised to pat themselves on the back. There’s also an opportunity to improve the playbook. Among the useful takeaways: embrace taciturnity, flexibility and humility.

Victorian rail mania has lessons for AI investors

12 Jul 2024

Excitement over artificial intelligence has spurred a wave of investment. In the mid-1840s, British speculators similarly went wild for another capital-intensive technology: railways. The historic boom and subsequent bust provide a salutary warning for today’s hyped-up markets.

Bond traders’ rate-cut party is yet to get going

26 Jun 2024

Central banks from Ottawa to Frankfurt are reducing rates. Bond prices should be rallying, but an index of euro zone debt is up just 0.1% since the ECB eased borrowing costs this month. While French elections are one reason why, tight US monetary policy is the key constraint.

Riches of Japan wealth push will be thinly spread

26 Jun 2024

After decades of deflation, rising prices threaten to erode the nation's savings. The urgent official task of turning citizens into investors offers a $37 bln revenue opportunity. But megabanks and firms including Nomura will share the spoils with aggressive younger upstarts.

China central bank’s reform push is shrewd gambit

20 Jun 2024

Governor Pan Gongsheng hinted at a substantial revamp, including trading government bonds and simplifying interest rates. The changes will be a gradual process, but after having its wings clipped, they should help the central bank reassert its power in setting monetary policy.

French cracks show up Italy’s messy fiscal house

19 Jun 2024

Investors fear Paris’s financial laxity. Yet, after wasting $235 bln on tax credits for home improvements, Rome’s finances are also shaky. EU funds will help offset the phasing out of incentives. But with weak growth and nervy markets, cutting debt is both harder and more needed.

Price cuts will lift US vibes only so much

11 Jun 2024

Since 2019, poorer Americans have received bigger pay hikes than their rich counterparts. Higher costs for basics like food and rent also mean inflation hit them harder. Fresh discounts from Target, McDonald’s and Amazon help, but offer limited relief for tight household budgets.

ECB can start worrying about growth, not inflation

6 Jun 2024

The European Central Bank cut interest rates for the first time since September 2019, but predicted inflation will stay above its 2% target until 2026. That could tempt Frankfurt hardliners to delay further monetary easing. Doing so would endanger the bloc’s fragile recovery.

Russian bond rout raises risk of financial crunch

4 Jun 2024

Yields on the country’s debt are at 20-year highs on worries about the budget largesse lavished on the economy. With inflation rising and interest rates at 16%, President Vladimir Putin’s desire to keep funding the conflict in Ukraine could result in lasting fiscal turmoil.

Change is coming to UK’s macroeconomic policy

31 May 2024

The opposition Labour Party, the strong favourite to win the upcoming election, has promised continuity in its fiscal and monetary approach. An ugly economic inheritance at home and global challenges abroad make that ambition unrealistic. Investors should prepare for a shift.

Fed should be independent, not untouchable

28 May 2024

Allies of Donald Trump want to blunt the Federal Reserve’s autonomy if the former US president wins a second term. That would be economically disastrous. But a mighty central bank with a $7 trln balance sheet requires better scrutiny, especially outside monetary policy.

Japan’s new widowmaker trade may have shorter life

23 May 2024

For more than two decades, investors who bet against Japanese government bonds lost their shirts. Taking a long position in the yen has been similarly painful recently as the currency dropped by 50% against the dollar. Yet there are several reasons why the slide could reverse.

Big Macs are pricing out American shoppers

23 May 2024

The driving force of the world’s largest economy, US consumers, may be buckling under higher costs on everything from lattes to burgers. In this Viewsroom podcast, Breakingviews columnists debate whether Main Street stalwarts like Starbucks or McDonald’s face a reckoning.

Buyers will keep springing for fancy Walmart wares

16 May 2024

Price increases hurt companies from Starbucks to McDonalds. But the $510 bln superstore, with thinner margins, is doing just fine. Decisions to pass cost increases to consumers might be to blame. With inflation still uncomfortably high, conscientious companies will benefit.

The dollar and the yuan are polar opposites

16 May 2024

The strong greenback and questions over a Chinese devaluation reflect the contrasting outlooks for the two economies. In this Viewsroom podcast, Breakingviews columnists debate why Beijing is unlikely to push down its currency and why the dollar will remain elevated.

Inflation saps Inflation Reduction Act mini-me

16 May 2024

Australia is following the US with long-term support for greening the economy. But it's peanuts by comparison with just $15 bln for industry and nothing to boost sales of EVs and heat pumps. Fear of price rises and rate hikes ahead of an election has deflated ambition.

Economic hard landing is delayed but not cancelled

10 May 2024

It’s two years since the Federal Reserve started hiking interest rates, yet economic growth has picked up and stocks have hit new highs. There are several reasons why the US economy is less responsive to tighter monetary policy. But it cannot avoid the effects indefinitely.