Inflation

Firefighting leaves central banks on shaky ground

22 Jun 2023

Policymakers in the UK, Switzerland, Norway and Turkey all hiked rates on Thursday. Stubborn inflation gives them little choice, even though they may cause recessions. In London and Ankara, ratesetters’ job is made much harder by politicians’ own failures and need for scapegoats.

UK has little wiggle room on mortgage aid

21 Jun 2023

Prime Minister Rishi Sunak is under pressure to cushion the 1.7 trln pound home loans market from high interest rates. Taxpayer support would spook markets and add to the Bank of England’s inflation headache. Targeted relief from banks would do less damage – but have less impact.

Credibility crisis requires BoE to write new plot

20 Jun 2023

The Bank of England’s inflation outlook is faulty because it relies on traders’ expectations. That leads markets to overreact to data, causing pain for homebuyers and firms. Adopting the US system, where policymakers make predictions, would curb policy mistakes and volatility.

Fed’s pause is now easier to extend

14 Jun 2023

Chair Jerome Powell’s rate-setting crew snapped its long streak of hikes. With the banking crisis stabilized, the FOMC can refocus on prices. Inflation persists, but is moving in the right direction, and there’s less reason to hew to investors expecting a fresh increase in July.

ECB’s autopilot raises risk of hard landing

14 Jun 2023

The European Central Bank is set to hike rates on Thursday and again in July. But traders’ hopes for cuts soon afterwards may be dashed, given pressure from hardline countries to tame stubborn inflation. Europe’s recovery is looking increasingly fragile.

Rich spending will buoy pesky inflation

13 Jun 2023

US prices rose 0.1% last month, suggesting inflation is slowing. Yet hotel and dining costs show Americans are still spending. That’s likely because high earners’ wages are moving in the right direction. They’ll keep pushing up prices, complicating the economic picture.

Greece offers UK handy way to axe ‘greedflation’

8 Jun 2023

The cost of what Brits eat is up by almost a fifth in a year, so Prime Minister Rishi Sunak is mulling a cap on shoppers’ bills. That would hit grocers and may end up boosting inflation. Athens’ limits on retailers’ margins are a better way to make staples more affordable.

Pricey services are weary ratesetters’ last battle

1 Jun 2023

The rising costs of flights, restaurants and concerts are hampering central bank efforts to drag consumer price inflation back down to 2%. In the US the post-pandemic consumption boom is fading. In Europe and the UK, though, higher wages are prolonging the fight.

Erdogan win sends stark note on economy and votes

29 May 2023

People in Turkey effectively opted to prolong the president’s wild policies that have led to 44% inflation. The extension of his 20-year rule tees up the country to inch further away from the West. For global leaders, it’s a warning that success in money matters only goes so far.

Biden gives little, gets less in debt ceiling deal

28 May 2023

The White House reached an agreement with Republicans to raise the debt limit for two years. The deal will avoid a big knock on Biden’s reelection plans, but the victories end there. Spending caps and social-aid restrictions give Democrats little else to cheer.

Economic stability hangs on US love of BBQ

26 May 2023

The US government is racing to ink a deal to avoid default ahead of the long weekend that marks the start of summer. Agreeing on how to handle the debt ceiling would relieve US creditors and calm markets. The rush will almost certainly leave big problems unfixed.

Central bankers face a balance sheet reckoning

26 May 2023

Assets held by central banks have exploded since 2008. As interest rates rise, some of those institutions are slipping into the red. We’re told normal accounting rules do not apply. However, losses erode inflation-fighting credibility and independence, argues Edward Chancellor.

‘Greedflation’ loosens its grip on food retailers

24 May 2023

Suppliers like Unilever and Kraft Heinz are easing inflation-busting price rises that hit grocers hard. That will benefit profit margins at the likes of Kroger and Carrefour. Their next challenge will be convincing cash-strapped consumers to pay, and buy, more in supermarkets.

Benched legislation has hidden costs

19 May 2023

Washington is laser-focused on raising the debt ceiling. But as spending debates rage, Congress’s back burner is getting crowded. Pending legislation, like one that secures bank services for cannabis businesses, enjoy broad support, but the window for easy passage is closing.

Shippers turn the tank around too slowly

17 May 2023

Americans are pulling back on spending after their pandemic-era shopping sprees. That's perhaps good news for inflation, but bad news for the shipping business, which is set for its biggest capacity jump since at least 2016.  As demand cools, shippers can’t pivot fast enough.

Turkey votes for long-term market instability

15 May 2023

With President Erdogan and his rival set for a May 28 runoff, uncertainty is the main upshot of the country’s elections. That prolongs the agony for a $900 bln economy plagued by 44% inflation and wild fiscal policies. An even weaker lira and warier foreign investors will ensue.

BoE pioneers can make a virtue out of uncertainty

11 May 2023

The Bank of England is living a central bank nightmare. Inflation is 10.1% but growth is stalling. After hiking by 25 basis points, its best option is to avoid the playbooks of US and European peers, pause and be ready to loosen or tighten policy based on what the economy does.

Inflation’s real benefits beat theoretical costs

5 May 2023

A barrage of shocks have battered the world’s developed economies, leaving central bankers struggling to adapt. Allowing prices to rise not only eases the economic adjustment but shrinks big debt piles, argues Felix Martin. That’s helpful to everyone – except bond investors.

Lagarde fine-tuning will aid sputtering euro zone

4 May 2023

The European Central Bank’s move to raise rates by just 25 basis points and speed up its exit from bond-buying signals a less aggressive approach. High inflation calls for more hikes, but Frankfurt’s decision to use a scalpel rather than a hammer will benefit Europe’s economy.

ECB risks interest-rate blunder after messy data

2 May 2023

The European Central Bank is none the wiser following a raft of new numbers. Lenders may be reining in credit, but headline inflation is rising. Hardliners will still push for a 50 basis point hike on Thursday. The uncertain conditions call for an increase half that size.