Interest Rates

Central banks still have space to fight inflation

15 Jun 2022

Jerome Powell and Christine Lagarde are tightening monetary policy to try to control soaring prices. Previous shocks have prompted the Fed and ECB chiefs to pause or loosen again. Despite plunging equity prices this time, calmer credit markets imply the “Fed Put” is far off.

UK lacks fiscal plan to buffer coming slowdown

13 Jun 2022

GDP has shrunk for two consecutive months while growth and inflation forecasts are the worst in the OECD. The Bank of England is fighting runaway inflation with ever-higher rates. As Brexit exerts an additional drag, the government needs a bolder approach to spending.

Inflation-shy investors try on “least dirty shirt”

9 Jun 2022

Interest rates in the developed world lag far behind rising prices. That’s sent savers flocking to traditional safe havens to preserve their capital. Edward Chancellor argues that emerging-market currencies may offer a more appealing alternative to financial repression at home.

ECB caught in a rate quagmire of its own making

20 May 2022

The European Central Bank may raise rates in July but is divided on how high it should go. By then, weakening growth will make it harder for President Christine Lagarde to end the eight-year era of negative rates. Moving earlier to curb inflation would have avoided the dilemma.

Polish mortgage holiday is bad idea with allure

17 May 2022

Warsaw wants to protect citizens from surging inflation and interest rates by offering breaks on home loan repayments. That would cost the country’s banks up to $3.6 bln. Forcing lenders to bear the effects of Russia’s war is crude and distortive, but may also win votes.

SoftBank’s Son is running out of ammunition

12 May 2022

The stock market values the $60 bln technology conglomerate at half the sum of its parts. In the past, founder Masayoshi Son has used buybacks to prop up the shares. High leverage and slumping markets make that tricky. More radical measures, like a breakup, seem off the table.

Fed manages to hurt both rich and poor

10 May 2022

Past tardiness in tackling surging inflation means low-income U.S. households face huge increases in the cost of living. Now, Fed Chair Jay Powell may have to hike rates so much that growth falters – a prospect hitting stocks and richer households’ net worth. Misery has company.

Capital Calls: Turkey, Nintendo/Sony, India IPO

10 May 2022

Concise views on global finance: President Erdogan makes another ham-fisted monetary intervention; the Switch maker weathers supply chain ructions better than its larger rival; New Delhi needs to be even more generous in its landmark listing of Life Insurance Corp of India.

Selloff shows China’s lack of investment traction

6 May 2022

U.S.-listed Chinese stocks underperformed during Thursday’s New York bloodbath, tumbling 8%. Beijing still hasn’t convinced global funds it’s more than just another volatile emerging market. Slowing growth and an inflationary environment will make it hard to change their minds.

Andrew Bailey unwillingly channels Paul Volcker

5 May 2022

The Bank of England boss raised rates to 1% to curb high inflation and may hike further despite the risk of recession. It’s old-school policymaking as practised by the former Fed chief. The more central banks behave this way, the more likely and severe a global downturn will be.

Fed jumps into field of financial land mines

4 May 2022

The American central bank has little choice but to hike interest rates and cut its balance sheet to fight inflation. But Chair Jay Powell’s moves make the $24 trln U.S. Treasury market more vulnerable to shocks. Bigger future increases could even tip the U.S. into recession.

Australia’s ANZ spoils interest rate party

4 May 2022

Boss Shayne Elliott is downplaying the benefits of central bank action at his $770 bln lender and ditching cost targets because of inflation. It’s a sober message compared to peers like HSBC counting on hikes for a boost. Erring on the side of caution is a better approach.

Capital Calls: U.S. GDP fall masks solid economy

28 Apr 2022

Concise views on global finance: Consumer spending and business investment are resilient amid price hikes.

European banks’ buyback boom faces bad-debt risks

22 Apr 2022

After two lean years, investors had hoped 2022 would bring bumper payouts from Barclays, BNP Paribas, and other big lenders. But the Ukraine war raises the chances of a recession. Rebuilding default buffers, which are slimmer than before the pandemic, may now be the priority.

Explaining the Fed’s tolerance for high inflation

21 Apr 2022

U.S. prices are rising by more than 8% a year, yet the central bank only just started raising interest rates. One possibility is that it fears a financial crisis, Edward Chancellor argues. Another is that inflation is the least painful way to resolve deep-seated social conflicts.

Capital Calls: China GDP, Fed bank cop, Singapore

18 Apr 2022

Concise views on global finance: China’s GDP print adds fuel to the easing debate; Former Treasury official Michael Barr is set to become America's next top bank regulator; Singapore’s succession plan clears the deck for other pressing business.

Fed’s 5-year balance sheet plan may be interrupted

7 Apr 2022

The U.S. central bank aims to reduce its $9 trln of assets by $95 bln a month. At that pace, even already fat pre-pandemic levels might not be reached until early 2027. That's a long time in economics, and in politics. Like the last attempt to slim down, it risks being thwarted.

Inflation regime shift looks scarily plausible

6 Apr 2022

Fed boss Jay Powell and other global rate-setters admit surging prices warrant policy action. Where they disagree is how forcefully they need to combat such pressures. The BIS, the umbrella body for central banks, says a new inflationary era may lie ahead. Its case is persuasive.

Strong U.S. jobs are blessing and curse for Fed

1 Apr 2022

The unemployment rate fell to 3.6%, near pre-pandemic levels. Dining out is back, and even travel is returning to normal. That all gives the central bank room to fight inflation. But employers are still short of workers, and continued robust hiring may make price pressures worse.

Buy gas now, pay later is a hard tiger to ride

1 Apr 2022

Fintech firms Klarna and Zip are offering U.S. punters interest-free instalments as a way to manage higher fuel bills. The fact that consumers use loans to afford mere essentials raises the risk of defaulted payments. And unlike discretionary sales, Klarna isn’t getting a fee.