Interest Rates

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.

Mario Draghi’s tacit advice to Christine Lagarde

24 Oct 2019

The outgoing ECB boss says his successor needs no guidance. But his last big news conference contained clues. First, never give up, though economic risks are rife. Second, turn the page on infighting. Third, be wary of financial bubbles. Fourth, expect brickbats, whatever you do.

Trailblazing German bond sale has hidden message

21 Aug 2019

The government of Europe’s biggest economy managed to sell 30-year debt at a negative yield for the first time. Expectations of imminent monetary easing created some demand. However, details of the auction reveal a shortage of investors buying into the fixed-income mania.

Gold would shine brighter in thick of currency war

21 Aug 2019

Trade and geopolitical tensions have heightened demand for safe havens, but with policymakers trying to keep currencies down, the dollar, yen and Swiss franc offer only partial protection. The yellow metal is different. No one will push back if its price keeps rising.

German weakness gives ECB carte blanche to be bold

14 Aug 2019

Europe’s biggest economy shrank in the second quarter as global trade tensions hurt export-orientated manufacturers. The problems will filter through to other sectors. That will lessen any Teutonic resistance to European Central Bank boss Mario Draghi’s planned monetary easing.

Brexit makes Carney less of a central bank oddity

1 Aug 2019

Bank of England boss Mark Carney is, like everyone, in the dark about whether Britain will crash out of the EU. Without that uncertainty, he might be tightening policy when peers are either easing or hinting they might. Being odd man out would be better than the current limbo.

Markets want to see colour of Mario Draghi’s money

25 Jul 2019

The European Central Bank chief opened the door to even looser monetary policy. The dearth of decisions or details meant the euro reversed initial losses while bond and stock prices gave up brief gains. He will have to deliver on his big promises before investors give him credit.

Swiss currency ticks towards new showdown

22 Jul 2019

The franc hit a two-year high against the euro. Policy interest rates are already negative so cutting them further may fail to dent its strength. A return to major intervention risks U.S. ire. Traders will take advantage of central bank boss Thomas Jordan’s bind.

New breed of central bankers is harder to read

11 Jul 2019

Jerome Powell at the Fed and Christine Lagarde, nominated to be the next ECB chief, are lawyers by training. Their thinking is more fluid than predecessors whose economic tenets informed a world view. That has benefits, but also means it’s harder to predict how they will react.

Global central bank assault claims Turkish victim

7 Jul 2019

Desperate to boost growth, President Tayyip Erdogan has fired the country’s central bank chief. He’s the latest casualty of a worldwide attack on independent monetary authorities. The blow to confidence makes any cut in the main rate, held at 24% since September, more damaging.

Buybacks prolong Wall Street rally nobody loves

20 Jun 2019

U.S. stocks are near record highs – thanks in part to purchases by their issuers. Investors are pulling out of equities and fund managers report extreme bearishness amidst a weakening global economy. Hopes of Fed rate cuts are a fragile support when it’s the only game in town.

Mario Draghi puts easing back in play on way out

6 Jun 2019

The ECB boss is set to end his eight-year term without once raising interest rates. Some colleagues have even floated the possibility of further cuts or more asset buying. His successor will have to figure out how to boost inflation and growth without banks scaling back lending.

How to pick the next Bank of England chief

24 Apr 2019

The hunt is on for a replacement for Governor Mark Carney, who leaves in early 2020. Only talented economists with top-notch central bank experience need apply. Creativity and grit are also required. Breakingviews’ interactive yardstick helps sift through the runners and riders.

ECB sop to banks will only help at the margin

10 Apr 2019

President Mario Draghi is considering ways to ease the pain that negative policy rates inflict on banks, such as tiered deposits in Japan and Sweden. Savings-rich German lenders would benefit most. But any earnings boost would be modest and does nothing to remedy high costs.

“Japanisation” of ECB will blight Europe’s banks

25 Mar 2019

Weak economic activity is raising the chances of the European Central Bank copying its Japanese counterpart, which has kept rates ultra-low for two decades and adopted ever more radical measures to boost inflation. Lenders in Japan show European peers the heavy toll that takes.