Inflation

France heads toward aimless short-term austerity

11 Oct 2024

PM Michel Barnier’s deficit-reduction plan mostly relies on 30 billion euros of tax hikes next year. That will hit growth just as corporate investment and consumer demand are flat. Long-term spending cuts would be a better solution. But this weak government cannot provide them.

Middle East turmoil edges closer to global economy

3 Oct 2024

Military escalation between Iran and Israel may at some point affect the price of oil. In this Viewsroom podcast, Breakingviews columnists debate how the conflict may prompt a fresh inflationary headache for central banks – and how Saudi Arabia might offset that risk.

Arcane signal flags an ill-starred economic shift

26 Sep 2024

Borrowing costs are falling in major economies. But a pointy-headed academic concept which indicates the equilibrium level of interest rates – “R-star” – suggests they are unlikely to revert to pre-pandemic lows. Investors should brace for a future where money is more expensive.

Under-fire workers spell trouble for US and Europe

17 Sep 2024

Unemployment remained low in both blocs even as interest rates rose. Staff hoarding and healthy profits averted layoffs. Now, though, US job vacancies are at the lowest since 2021 and euro zone CEOs want to hire less. If labour markets crack, recessions will be harder to avoid.

Thrifty Europeans demand more aggressive rate cuts

12 Sep 2024

The European Central Bank lowered rates again on Thursday. President Christine Lagarde hopes to spark a consumer-led recovery. But households are saving 15% of their income, wage increases are slowing and mortgage costs rising. Only more rapid easing can cause a spending surge.

China GDP hiccup would have long-term aftershocks

2 Sep 2024

This year’s growth target of “around 5%” faces headwinds. It’s now more a planning tool, so a miss might not seem as consequential as when the goal was all but compulsory. But a slowdown would probably prompt new policies to keep alive 2035 plans like doubling per-capita income.

India’s food inflation debate will get spicier

2 Sep 2024

Governor Shaktikanta Das shot down an idea from New Delhi to strip food costs from the central bank's price target. Ignoring the item would allow the RBI to trim rates and combat slowing GDP growth. It would also hurt the poor. As inequality rises, so will pressure to bend.

Europe’s inflation fix requires corporate pain

30 Aug 2024

Price growth in services is still running at 4.2%, too high for European Central Bank President Christine Lagarde. To bring it down, companies’ margins will have to absorb rising wage costs. Shareholders may balk but consumers, and the euro zone economy, will benefit.

Euro is reluctant wearer of King Dollar’s crown

23 Aug 2024

The currency is up nearly 3% against the greenback this month. That is odd because markets think European interest rates will fall more than US ones. Worries about Washington’s budget deficit are a factor, but the export-led euro zone can ill afford a strong exchange rate.

The ECB is running out of time to revive euro zone

16 Aug 2024

The bloc’s GDP rose by a steady 0.3% in the second quarter. But business surveys and sentiment data suggest growth is flagging. Inflation is sticky so European Central Bank chief Christine Lagarde may be reluctant to cut rates decisively. But waiting risks impairing the recovery.

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.