Inflation

Japan’s rate shift will hit zombie firms hardest

14 Mar 2024

The central bank could end an era of negative borrowing costs as early as next week. In this Viewsroom podcast, Breakingviews columnists argue that large companies are ready for the tightening, but many struggling small businesses could hit the wall even if policymakers go slow.

Capital Calls: Small Fed windows

12 Mar 2024

Concise views on global finance: US consumer prices rose 3.2% year-on-year in February, above the Federal Reserve’s 2% target, prompting traders to rein in hopes for rate cuts. The agency’s Chair Jerome Powell could have avoided that by guiding markets towards a higher number.

Excessive UK tax giveaways risk longer-term harm

5 Mar 2024

Finance minister Jeremy Hunt may spend some 15 bln pounds in pre-election fiscal gifts in Wednesday’s budget. He could be tempted to do more – and make life difficult for the next government – by further cutting public services. But that would put the country in a bind.

A plot twist threatens Jay Powell’s artful script

27 Feb 2024

Higher borrowing costs are helping achieve the Fed’s 2% inflation target without a recession, but US wages and consumer spending tell a different tale. The upward price pressure augurs elevated interest rates for longer. To ensure a happy ending may require revising the story.

Why central banks risk making more mistakes

27 Feb 2024

Western rate-setters were late in fighting inflation. In this Exchange podcast, TS Lombard economists Dario Perkins and Davide Oneglia argue that, as price growth abates, the US Federal Reserve and European Central Bank may be too slow in easing monetary policy.

Central banks’ waiting game plays with fire

21 Feb 2024

Western policymakers fret that if they cut rates too soon inflation may rebound. But keeping monetary policy tight has costs. Staying put as price growth abates means rate-setters squeeze consumers and companies, raising the odds of blowups in areas like commercial real estate.

Economic slack gives Bailey cover to cut rates

31 Jan 2024

The market wants the Bank of England to lower borrowing costs soon. Governor Andrew Bailey is set to keep them steady on Thursday because inflation remains high. Yet sub-par economic performance in the next few years could pave the way for easier monetary policy from May.

Close the Volcker playbook and open Greenspan’s

30 Jan 2024

Fed Chair Jay Powell wisely embraced Paul Volcker’s inflation-fighting approach from the early 1980s and quickly raised borrowing costs. With price pressures abating, it’s time to change tactics. Leaning into Alan Greenspan’s tactical 1995 interest rate cuts makes more sense now.

ECB is battling an imaginary wage spiral

24 Jan 2024

European Central Bank President Christine Lagarde is set to hold rates this week because she fears rising salaries will boost inflation. Yet euro zone workers are getting raises of just 3.8%, down from a year ago. Frankfurt may not want to cheer bigger pay, but it can ignore it.

Fixed income investors have reasons to be fearful

23 Jan 2024

Uncertainty over the direction of inflation and monetary policy is buffeting markets. In this Exchange podcast Jim Grant, founder of ‘Grant’s Interest Rate Observer’, discusses his gloomy outlook for US bonds and sounds a warning about the risks of shadow banking.

Athleisure boom offers edge to premium retailers

18 Jan 2024

Wealthy shoppers are splurging on pricey leggings and sneakers despite inflationary pressure. That helps premium brands like $59 bln Lululemon and On while Nike and others deal with inventory pile-ups. If the big players can’t catch up, valuation gaps will only get wider.

BoE can win inflation race but lag on rate cuts

17 Jan 2024

UK price growth could drop in the spring due to lower energy bills, enabling the Bank of England to hit its 2% target before the US and Europe. But wage and services inflation will stop Governor Andrew Bailey from reducing borrowing costs. So will a likely UK fiscal splurge.

Imperial dollar is impervious to lower rate hopes

9 Jan 2024

In theory, the currency should weaken as the Federal Reserve readies to cut borrowing costs. But it is up 1% in 2024 and just had its best week since July. The US economy’s resilience is one reason. But the greenback’s strength also becomes a perpetual problem for everyone else.

Capital Calls: Cognac, Euro zone inflation

5 Jan 2024

Concise views on global finance: China’s new brandy probe may not be French drinks giants’ main headache; new euro area inflation figures sit all the more awkwardly with the ECB’s refusal to consider rate cuts.

Dear Chancellor: inflation will fall…when it falls

28 Dec 2023

Bank of England Governor Andrew Bailey has to write to the UK finance minister when consumer price growth is above or below 2%. Yet it’s clear mere central bankers can’t influence the behaviour of people or firms. Breakingviews imagines a letter in 2024 which says as much.

Policymakers take divergent paths toward rate exit

14 Dec 2023

Central banks in Europe and the US left borrowing costs untouched this week. But the latter went a step further and unexpectedly promised cuts. In this Viewsroom podcast, Breakingviews columnists explain how ratesetters, who were slow to tackle inflation, could be laggards again.

Powell was pragmatic; Lagarde will have to be

14 Dec 2023

The European Central Bank, like the US Federal Reserve, left its rates unchanged. But unlike Fed Chair Jay Powell, ECB boss Christine Lagarde didn’t imply that lower inflation meant looser monetary policy. A slowing economy and abating price pressures will push her there in 2024.

Last word of 2023 goes to Jay Powell

12 Dec 2023

Investors are pricing in 1 percentage point of US rate cuts next year. The Federal Reserve doesn’t want that, so its chair needs to talk up inflation on Wednesday. If markets keep ignoring him, rallies in stocks and bonds will continue, but the central bank’s job will get harder.

White House needs to talk turkey about inflation

22 Nov 2023

The Biden Administration has encouraged Americans to “be thankful” for falling prices this year. But cherry-picking some items that have edged down from recent peaks won’t counter the fact that US citizens feel glum about the economy. A bit of empathy might go a long way.

UK’s overdue business-friendly budget has a catch

22 Nov 2023

Premier Rishi Sunak slashed taxes for workers and businesses at an annual cost of 20 bln pounds. It’s a partial antidote to the damage of Brexit, inflation and Britain’s dismal growth. Yet his party’s erratic policies, and poor chances at next year’s poll, will dent its impact.