Interest Rates

Chancellor: Wall Street is firmly in Wonderland

9 Jul 2020

As society melts down, markets melt up. The constant manipulation of interest rates has turned the world of finance upside down. Serious investment has become impossible. It’s the sort of topsy-turvy state Lewis Carroll might have imagined if Alice was putting money to work.

Corona Capital: GE cash burn, Macy’s lifeline

28 May 2020

Concise views on the pandemic’s corporate and financial fallout: General Electric’s cash flow will be more negative than expected as Covid-19 damages its aviation and power businesses; and U.S. department-store chain Macy’s borrows more, buying time but not much else.

Negative rates would trigger UK banking rollup

19 May 2020

British rate-setters including BoE Chief Economist Andy Haldane are contemplating taking policy rates below zero. Bank margins would suffer, but big ones like Barclays have more fee income to rely on. Stragglers like Virgin Money and Metro may have to put themselves up for sale.

Breakdown: Fed is right to nix negative rates

15 May 2020

Futures markets are pricing in a small chance of policy interest rates going below zero even though Jay Powell, chair of the U.S. central bank, rebuffed the idea this week. Europe and Japan are already in that territory. Breakingviews explains why D.C. can afford to say no.

China throws savers under bus full of bankers

27 Mar 2020

The government might cut interest rates on deposits, buttressing lenders’ margins as defaults rise. Ordinarily that would encourage people to invest more and hoard less. Unfortunately Beijing has deliberately made it hard to find decent returns elsewhere in the system.

China’s rate caution is conscious uncoupling

23 Mar 2020

The central bank is holding lending benchmarks steady as global peers slash. Bad debts and capital flight risk make big fiscal and monetary moves more dangerous than in 2009. That pushes the burden for stimulus to the government. Either way, structural imbalances will get exacerbated.

Fed’s market fixes leave biggest problem unsolved

16 Mar 2020

Chair Jay Powell wants to ensure an ample global supply of dollars and avoid a repeat of last week’s U.S. bond market disorder. But measures like asset purchases will at best mitigate the stress. The root of tensions is the risk of companies going bust because of the coronavirus.

Chancellor: Monetary cure carries risk of its own

16 Mar 2020

Central bankers aren’t arguing that slashing rates and printing money will resolve the coronavirus panic. But the experience of the 1970s oil crisis suggests meeting a severe global supply shock with fiscal activism and easy money may bring inflation back in a nasty way.

Fed arsenal shows up White House peashooter

15 Mar 2020

The U.S. central bank slashed interest rates, increased government bond buying and made it easier for foreign firms to get dollars. It’s an impressive response to the Covid-19 crisis. But without fiscal stimulus or adequate public health remedies, the Fed can only do so much.

Christine Lagarde makes hard ECB job even harder

13 Mar 2020

A blunt remark by the European Central Bank chief drove up Italian bond yields - the last thing she wanted. She could get away with not knowing what pushes traders’ buttons when markets were placid. But that lacuna means she’s facing a crisis saddled with a credibility deficit.

Central bank largesse is mixed bag for EU lenders

13 Mar 2020

Christine Lagarde and Mark Carney are giving banks free money and capital relief to fight a virus-induced slump. Investors will see few benefits, though. Higher dividends are taboo, and cheap funds will finance lower-cost loans. Balance sheets have become a social safety net.

ECB’s stealth easing enlists banks in virus fight

12 Mar 2020

President Christine Lagarde left interest rates unchanged but used other tricks to support the euro zone economy through Covid-19. Lenders can borrow at sub-zero rates and dip into capital and cash buffers. They have every incentive to help her limit the damage from the slowdown.

Carney’s BoE legacy is bigger than monetary policy

30 Jan 2020

Outgoing Bank of England boss Mark Carney has ably navigated choppy economic and political waters since 2013. Early attempts to use rhetoric to steer markets went awry, but his big success was shining an early light on the risks that climate change poses to the financial sector.

Eerie currency calm jeopardises more banking jobs

30 Jan 2020

Major exchange rates have been relatively stable because economies are moving in synch and global monetary policy is broadly accommodative. That makes foreign exchange less of a money-spinner for banks. Expect the ranks of FX traders and sales staff to shrink further.

Mark Carney has reason to ease before he leaves

13 Jan 2020

The UK economy grew at its slowest annual pace since 2012 in November. The Bank of England boss has one more policy meeting left before Andrew Bailey takes over. Catching up with recent easing by the U.S. Federal Reserve and European Central Bank would be the best handover gift.

Euro zone bank rally is built on sand

9 Jan 2020

The bloc’s 20 largest lenders, such as BNP and ING, are worth $84 bln more than in October. Investors believe the ECB is now done with rate cuts, which squeeze profit. But renewed trade frictions could change such thinking. And rising capital requirements will weigh on returns.

Sweden will manage a singular rate rise

6 Dec 2019

The Nordic country’s rate setters want to lift the policy rate out of sub-zero territory in December. Sluggish growth, lower inflation and trade weakness mean they face a high burden of proof to justify such a move. Their explanation may not stretch to a second hike anytime soon.

Shinzo Abe fires off another feeble arrow

5 Dec 2019

Japan’s latest fiscal stimulus package, worth just over $120 billion, will avert stagnation or worse. But a recent consumption tax hike and slower global activity pose risks that policymakers lack the firepower to tackle. Healthy growth and inflation will prove elusive.

Hadas: Sweden raises tone of negative rate debate

6 Nov 2019

Its central bank plans to increase the policy interest rate to zero. Current conventional thinking says that is a step in the wrong direction. But there are reasons to worry about minus signs on rates. If the economy emerges unscathed, others may copy the Swedish experiment.

Fed cut is over-stuffing the cushion this time

30 Oct 2019

Another interest-rate reduction is what traders wanted. But U.S. stocks just hit a record high, the economy is chugging along with solid – if not spectacular – growth, and inflation has crept up. The Fed’s touted data dependency is looking more like addiction to the markets drug.