Interest Rates

As earnings go, so goes the world economy

20 Feb 2019

For the first time since 2013, no country in the MSCI World Index is seeing more earnings upgrades than downgrades, Morgan Stanley says. The phenomenon usually coincides with U.S. or euro zone recessions. That augurs poorly for an incoming raft of economic data.

Trump’s Fed pressure is a paper tiger, so far

14 Jan 2019

The U.S. president often bashes the central bank’s rate increases on Twitter. It’s unhelpful but transparent – which makes it easier for the Fed to resist. The real danger is if Trump bullies Jerome Powell behind closed doors, or changes his tactics for the two open board seats.

Strong U.S. jobs are weak tonic for markets

4 Jan 2019

Payrolls expanded at a surprisingly robust pace in December and wages ticked higher. The data shows an American economy ending the year on a high note. But employment is a lagging indicator. Slowing earnings and trade-war risks are likely to be more powerful market motivators.

Buyout lenders will enter a new world of pain

4 Jan 2019

Rising bond yields and volatile markets mean the leveraged finance boom is over. The lenders which financed it have taken more risk than ever, and given away the ability to control struggling companies. When deals do go bad, they will get back much less than they are used to.

U.S. bond yields turn from green light to red

4 Dec 2018

Treasury yields plunged to a three-month low on Tuesday and flashed a potential recession signal. While easy rates have supported the economy and stock market during the recovery, the latest moves suggest troubling weakness. They also raise the risk of a Fed policy mistake.

Powell and Carney at least know their own limits

29 Nov 2018

The Fed chair irks U.S. President Donald Trump when rates rise, while the Bank of England boss took all-around flak for unveiling worst-case Brexit scenarios. Central bankers are imperfect but, unlike some critics, they rarely claim infallibility and usually show their workings.

Breakdown: Libor habit is hard and costly to kick

23 Oct 2018

Over $300 trillion of financial contracts are linked to discredited benchmark interest rates. Switching to new ones could disrupt economies as well as markets. It will take a lot of money, time, and willingness to reconcile conflicting interests to avoid bad withdrawal symptoms.

Indebted consumers save Wall Street’s bacon

12 Oct 2018

JPMorgan and Citi beat earnings estimates, partly helped by consumers showing no strain from their record levels of personal debt. Tax cuts and rising wages mean this can continue for a while. Lumpy investment-banking revenue gives banks a reason to hope it does.

Fed helps Hong Kong homebuyers at owners’ expense

28 Sep 2018

Banks are hiking their benchmark rates for the first time in 12 years. As tighter U.S. monetary policy feeds into Hong Kong mortgages, flat prices look set to fall, relieving young buyers. But cooling the world’s bubbliest property market could tax economic activity.

India’s financial turmoil augurs a reckoning

25 Sep 2018

Infrastructure lender IL&FS has helped trigger market mayhem, prompting regulators to step in to try to calm investors. The boss of India’s largest bank says this isn’t a “Lehman moment”. Maybe, but the amount of bad debt and short-term funding are worrisome.

Chancellor: The carry trade that followed Lehman

14 Sep 2018

The subprime crisis was born from yield-chasing in the Greenspan easy-money era. Even lower interest rates since the Lehman bust revived the global carry trade. Another maelstrom will be hard to avoid.

Turkey’s outbreak of common sense has limits

13 Sep 2018

The central bank has hiked rates more than markets expected, a welcome sign of independence after attacks by President Erdogan. The move may avoid a currency crisis, but Ankara’s political and economic vulnerabilities endure. And tensions between bank and state may get worse.

Chancellor: “Haves” enriched most from Lehman bust

13 Sep 2018

Ultralow interest rates after the crisis may have lifted many boats, but the yachts of the wealthiest have been buoyed above all. Wall Street and the CEO class particularly benefited. This has come at the expense of the less fortunate, who are making their displeasure known.

Chancellor: The legacy of ultralow interest rates

10 Sep 2018

This first in a series of "Ten Years After" essays argues the bold monetary experiment that followed Lehman’s demise unleashed speculative manias, carry trades, populism born of inequality, capital misallocation and a China bubble that pose grave threats to the financial system.

Britain is making a mess of replacing Mark Carney

3 Sep 2018

The Bank of England boss may extend his term for a second time, keeping him at the central bank beyond June 2019. That could offer comfort to investors worried about Brexit. But it would suggest the government is struggling to find a good successor. That’s a bad signal to send.

Mark Carney raises rates from position of weakness

2 Aug 2018

The Bank of England governor nudged up borrowing costs even though growth is tepid and will suffer if Brexit goes badly. The economy’s speed limit has declined since the financial crisis and EU talks will take time to pan out. He had little choice, but may have to reverse course.

India central bank doubles down on inflation fight

1 Aug 2018

The Reserve Bank of India raised rates by a quarter of a percentage point even though manufacturing activity slowed in July. The hike may hamper economic growth but removes doubts about policymakers’ commitment to a relatively new inflation mandate. The trade-off is worthwhile.

Bank of Japan tries cheap way of imposing will

31 Jul 2018

Governor Haruhiko Kuroda has pledged to keep rates very low for an extended period to calm investors’ concern that monetary policy may become less loose. The no-cost tactic to keep bond yields in check is born of necessity given how many assets the central bank is already buying.

Turkey misses easy chance to win credibility

24 Jul 2018

The lira slumped after the central bank left interest rates unchanged. With inflation at 14-year highs, there was every reason to tighten policy. Inaction will only reinforce investors’ concern that President Tayyip Erdogan’s distaste for higher rates is exerting undue influence.

BoE wrangle reflects rate setters’ identity crisis

22 Jun 2018

The opposition Labour party wants the Bank of England to include productivity targets in its mandate. The idea seems flawed - monetary policy is a weak tool for boosting efficiency. But it reflects a growing political dissatisfaction with independent yet impotent central banks.