Powell’s rate cuts may go from steady to steep 10 Apr 2024 Inflation hit 3.5% in March, making a June cut to borrowing costs unlikely. But Fed Chair Jay Powell is running out of time. A decrease in September would be seen to favor President Biden. The November decision is one day post-election. The only other option: take bigger whacks.
BoE gears up to unnecessarily prolong worker pain 20 Mar 2024 The Bank of England is set to keep rates steady because it wants to see slower wage growth before easing policy. But pay rises are already falling and won’t cause inflation. The central bank could help 30 mln employees, and 11 mln borrowers, by cutting borrowing costs sooner.
Japan’s first step to new normal is the easiest 19 Mar 2024 The central bank raised interest rates, ending 26 years of unconventional stimulus. Policymakers hinted they will keep borrowing costs steady for a while but the pressure to curb inflation, rather than unleash its virtues, may rise fast. The hard work for the country starts now.
Only an oil slump can stop Vladimir Putin 18 Mar 2024 To keep pumping money into his Ukraine war, the newly re-elected president will have to squeeze Russians. Nobody can prevent him from further unpopular measures. A sharp drop in oil revenue might force him to change course, but that is hard and risky for the West to bring about.
ECB’s money drain has silver lining for markets 14 Mar 2024 The European Central Bank is ready to exit its huge stimulus programme. With 4.7 trln euros of bonds on its books, that will take time but policymakers want few surprises. A new regime of setting rates and relying on banks to ask for loans will wean them off cheap money.
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.