Interest Rates

Investors need to get used to working harder

27 Jan 2022

America’s economy expanded at a 6.9% annual pace in the last quarter of 2021. A healthy rebound supports the Fed raising interest rates soon. But the U.S. central bank faces a balancing act, and everyone else following markets will have to be more alert than before, too.

Jay Powell embarks on difficult Goldilocks act

26 Jan 2022

The Fed boss is likely to signal rates will start rising in March to curb inflation. The robust economy can cope with that as well as the three other hikes that investors expect him to deliver before year-end. Anything more will leave little room to deal with economic hiccups.

Fed rate feast leaves crumbs for bank customers

19 Jan 2022

Big U.S. lenders like JPMorgan are readying for an inflow of interest income as the central bank puts up rates. But the amount they pass to depositors is likely to be even more paltry than in past cycles. Competition from upstarts like SoFi may improve service but not returns.

Christine Lagarde will win rate rise timing tussle

19 Jan 2022

Money markets imply the European Central Bank will hike twice this year, even though its boss says policy tightening is unlikely in 2022. She will have to work hard to convince markets, but reason is on her side. Wage pressures are less evident in the euro zone than in America.

Banks’ rate-rise rewards may be bigger than ever

17 Jan 2022

Deposits at large U.S. lenders are up by a third since 2019 to $11 trln. They’ve stashed much of the cash in central-bank reserves, which immediately earn more as rates go up. Tighter monetary policy usually helps banks, but especially so given their current mix of assets.

Central banks will give risky debt a helpful shock

13 Jan 2022

Benchmark bond yields are rising as rate-setters around the world scale back asset purchases. That will reduce the appeal of corporate debt, but a correction in credit markets is nothing to fear. A setback may lead to less hazardous terms for bondholders, and a rout is unlikely.

Capital Calls: Bundesbank, Biogen

20 Dec 2021

Concise views on global finance: The new head of Germany's central bank is a reassuringly boring choice; cutting the price of its Alzheimer's drug could help Biogen squeeze something out of what looks like a flop.

Trailblazing UK rate rise may pay off in the end

16 Dec 2021

The Bank of England is the first major central bank to hike its policy rate. The ECB faces less acute price pressures and the Fed must consider the job market alongside inflation. It’s a gamble, but acting now means British rate-setters will have less hiking to do in the future.

Take China’s easing signals with a grain of salt

7 Dec 2021

Beijing is flagging a fresh focus on economic stability as growth slows, dropping tough talk about tech monopolies while pumping $188 bln into banks. Some battered sectors will get political breathing room, but this probably isn’t the sort of stimulus investors are looking for.

Omicron may give inflation a chance to bed in

29 Nov 2021

The new coronavirus variant could ease short-term price pressures if it triggers wider lockdowns that curb consumption. But if it prolongs supply-chain problems the reverse will be true in the longer term. Especially if cautious central bankers delay tightening monetary policy.

Voters are last brake on Turkey’s lunatic express

19 Nov 2021

Bullied by President Tayyip Erdogan, the central bank slashed borrowing costs to 15%. Fearing runaway inflation, the lira plunged to record lows. With few other checks on a leader at war with interest rates, 2023 elections may be Turks’ best hope of restoring monetary sanity.

Central Europe is monetary policy’s control test

8 Nov 2021

The Czech, Polish and Hungarian central banks are hiking interest rates, the traditional riposte to rising inflation. In contrast, peers in major economies are responding less aggressively to price pressures. That makes for an interesting experiment.

UK wades into central banks vs. markets fray

4 Nov 2021

Bank of England boss Andrew Bailey has a different mandate from Fed Chair Jay Powell. But his basic challenge is the same: persuading investors that interest rates won’t rise as much as they think next year. The Briton’s old-school inflation target makes his job harder.

ECB needs a louder megaphone to reach bond markets

28 Oct 2021

President Christine Lagarde said she won’t hike rates as soon as investors anticipate. But that didn’t change their expectations and euro zone debt yields rose. She will have to do a better job of convincing them if she is to avert an unwanted tightening in financing conditions.

Chancellor: Time to inflation-proof portfolios

21 Oct 2021

As consumer prices and interest rates rise, financial markets will become more volatile. Investors can protect themselves by reducing duration, their exposure to rates, and even by holding cash. That may sound boring, but it provides a means to buy assets when they become cheap.

Stagflation jitters are at least half wrong

29 Sep 2021

High inflation and stagnant activity would be a noxious mix for markets. Central bankers have the tools, and likely the will, to combat the former. But when price pressures are a symptom of supply shocks, as now, monetary policy is a crude weapon that will lead to weaker growth.

Turkey goes deeper into parallel monetary universe

23 Sep 2021

Ankara cut its main policy rate to 18% from 19%, kowtowing to President Erdogan just as other central banks take the opposite tack. A weaker lira and soaring energy bills add to the economy's inflation pains. With two years to another election, there’s little respite in sight.

Emerging economies face stages of inflation grief

16 Sep 2021

Central banks’ reactions to rising prices come in three steps, BNP Paribas reckons: denial, acceptance, and action. Brazil and Chile are further along, having hiked rates quickly as pressures mounted. Investors will prefer them to countries stuck in the first stage, like Turkey.

Fed can’t ignore even fleeting inflation

28 Jul 2021

The U.S. central bank reiterated its belief that price spikes won't last. Still, polls show consumers worrying, making politicians edgy. Tapering the Fed's bond buying wouldn't directly counter inflation. But it has to happen sometime, and it would give Chair Jay Powell cover.

IMF skims over non-viral risks to global economy

27 Jul 2021

The emergence of new highly infectious Covid-19 variants could wipe about $4.5 trln off global GDP by 2025, the international lender warned. Its economic update pays less attention to policy missteps, market ructions, or more bankruptcies. Yet these also pose a threat to growth.