Interest Rates

ECB has reasons to avoid a panicky hike

2 Sep 2022

The European Central Bank looks set to jack up interest rates next week. Persistent inflation warrants some monetary tightening. But too sharp an increase would exacerbate the chances of a recession, at a time when rising debt gives governments less room to fight back.

It’s time to worry about Greece again

26 Aug 2022

A bugging scandal threatens Prime Minister Kyriakos Mitsotakis’ government and renewed political instability. It’s not a re-run of the Grexit crisis. But the country’s high deficit and debt are a cause for concern when interest rates and energy prices are rising, says Hugo Dixon.

Cash buyers have whip hand in London office slump

17 Aug 2022

The value of the UK capital’s buildings could fall 12% in the next 18 months, Bank of America reckons. But private equity houses will struggle to swoop as high interest rates make debt-fuelled purchases uneconomic. Cash-rich pension funds will put a floor on price declines.

Beijing is too bashful with its balance sheet

15 Aug 2022

Corporate loans plunged in July while real estate worsened and retail stayed weak. Even as the central bank cuts interest rates, the government is staying fiscally conservative, relying on indebted local provinces to stimulate demand. That looks increasingly unsustainable.

Capital Calls: Amazon deal, Beyond Meat

5 Aug 2022

Concise views on global finance: Amazon’s latest purchase to buy iRobot rolls over FTC Chair Lina Khan, a critic of the company’s expansion. Meanwhile, the founder of the plant protein company envies another meat substitute, SPAM.

Capital Calls: Bank of England’s dark clouds

4 Aug 2022

Concise views on global finance: The UK central bank predicts inflation will hit 13% and the economy will slip into recession just as Boris Johnson’s successor as prime minister takes charge.

HSBC’s cross-border ties are paying dividends

1 Aug 2022

CEO Noel Quinn promised a 12% return on tangible equity and higher payouts to shareholders as the global bank rebuffed Ping An’s breakup call. Higher U.S. interest rates help, but if the Chinese insurer has spurred the $125 bln bank to raise its game, all investors will benefit.

Cheery bank CEOs have the edge on gloomy investors

29 Jul 2022

Santander, BNP, ING, Lloyds and SocGen have lost 27% of their value since mid-February, on fears higher rates will cause defaults to rise. Chief executives, meanwhile, expect returns to stay high. Share prices implying steeper losses than 2020 suggest the selloff is overdone.

ECB risks forgetting 1990s currency crisis lessons

18 Jul 2022

President Christine Lagarde may soon unveil the central bank’s tool to control sovereign bond yields. Struggles with semi-fixed exchange rates before the euro offer a cautionary tale. To fend off speculative attack, authorities are best off keeping targets and methods vague.

Spain’s ropey bank tax will have European copycats

13 Jul 2022

The country’s left-wing government is raiding banks for 1.5 bln euros a year. Taxing lenders based on their future benefits from rising interest rates represents shaky logic. But with inflation soaring across Europe, such populist measures will become more enticing.

Hong Kong banks are slow to gain from rate rises

7 Jul 2022

The Asian hub must track the Fed’s rate hikes to preserve its currency peg, but commercial lenders can’t follow so quickly. That reflects China’s weak growth and long term, the awkwardness of the 39-year-old system. Near term, it’s a profit drag for HSBC and Standard Chartered.

Capital Calls: EU bank windfalls

4 Jul 2022

Concise views on global finance: The European Central Bank is worried banks will pocket a windfall on special loans when it starts raising rates. But deciding whether the bonanza is too big is a political choice.

It’s time to rediscover the importance of interest

30 Jun 2022

The cost of money is not only key to controlling prices. It also affects the value of financial assets, the allocation of capital, and the appetite for debt. Ultralow interest rates distorted these decisions, Edward Chancellor says. Little wonder financial anxiety is rising.

Capital Calls: Russian default, Inflation and debt

27 Jun 2022

Concise views on global finance: Moscow defaulted on its foreign debt for the first time in over 100 years, leaving bondholders in limbo; the Bank for International Settlements wants rates raised “quickly and decisively”, but is also worried about higher borrowing costs.

Investors need to learn to ride inflation cycle

23 Jun 2022

Bonds and shares are tumbling as prices soar, just as in the 1970s. The experience of that decade suggests value stocks, commodities and safe-haven currencies offer the best protection, says Edward Chancellor. But wild swings in inflation can still catch markets off-guard.

Lagarde will struggle to do a Mario Draghi

21 Jun 2022

Euro zone bond markets have stabilised since the ECB president pledged to buy bonds. That raises the chance that investors cowed by her Italian predecessor’s promises won’t need her to intervene much. Just as well, given interest rates and political risks make it harder to do.

Capital Calls: Hydrogen IPO, Call centre M&A

20 Jun 2022

Concise views on global finance: Despite Thyssenkrupp postponing its clean energy listing, De Nora is still pressing on with its own one at a lower 3 bln euro valuation; customer-service group Sitel agrees to buy 2.6 bln euro rival Majorel in a cash-and-stock deal.

Central bankers forget the lessons of the 1970s

16 Jun 2022

Inflation is complex, yet all sustained increases in prices have been accompanied by an expanding money supply. The Federal Reserve and other central banks ignored this the last time inflation took off, writes Edward Chancellor. There’s no sign they are learning any faster today.

Fed drives a stake into own rate-setting newthink

15 Jun 2022

A 75-basis-point rate hike, the biggest since 1994, was a rational response to surging prices. It’s also the death knell for Federal Reserve boss Jay Powell’s focus on making monetary policy more flexible and inclusive. Bold innovation is best left until prices have settled down.

ECB’s crisis weapon pledge is vague and late

15 Jun 2022

The European Central Bank will “accelerate” work on a new tool to control soaring bond yields from weak sovereigns. The lack of detail reflects divisions within the bank on when and how to use such a programme. It’s an invitation to markets to test the ECB’s resolve yet again.