Interest Rates

Bond market tightening complicates Powell’s task

31 Jan 2018

U.S. Treasury yields rose to near four-year highs even as the Fed left policy unchanged at Janet Yellen’s last meeting. A fresh growth spurt and worsening deficit outlook pose challenges for successor Jerome Powell. Hiking in a rising-rate environment is riskier for the economy.

Fed’s inflation-target rethink dodges big question

29 Jan 2018

Some U.S. rate-setters wonder about their 2 percent goal – both its level and whether it’s more a ceiling or a long-term average. The debate is welcome but could be even more radical. Today’s real issue is whether central bankers can fully explain, let alone control, inflation.

German workers may frustrate ECB’s inflation hopes

9 Jan 2018

Industrial staff in Europe’s biggest economy are striking for higher pay. They may, however, trim wage demands in return for flexible working. If pay pressures fail to flare in such a tight labour market, the European Central Bank can hardly count on them surfacing elsewhere.

Tight U.S. labor market may finally move Fed

5 Jan 2018

December’s relatively weak jobs and wage growth gives policymakers a breather. But with 2.1 mln positions created in 2017 and unemployment historically low, long-awaited pay increases - along with new tax cuts - could soon start stoking inflation. That would force the Fed’s hand.

Yellen’s fine legacy gives way to uncertain future

13 Dec 2017

With her fifth and final rate hike, the Fed boss has put monetary policy on a path to normalization without spooking markets or hurting growth. Her successor may not be so fortunate. As the central bank gauges potential tax cuts and trade wars, its moves become less predictable.

Bank of Korea had best go slow with rates

30 Nov 2017

Seoul’s first increase in benchmark borrowing costs for more than six years is a prudent step toward normalising monetary policy, given signs of economic strength. But crushing consumer debt and a housing slowdown mean the central bank must tread carefully.

Yellen gives Congress parting shot on growth, debt

29 Nov 2017

The outgoing Fed boss warned of growing deficit risks just as lawmakers weigh tax cuts that would exacerbate it. It’s also up to politicians to improve education, investment and infrastructure spending. Her message of central bank limitations is one her successor will echo.

Fed chair pick shows mastery of central-bank arts

28 Nov 2017

Jerome Powell breezed through his Senate confirmation hearing with Zen-like confidence. He dodged the tax-reform debate, kept rate-hike comments predictable, backed Fed independence and defended its bank-rules review. The prospect of post-Yellen stability will please markets.

Central bankers go self-referential on rhetoric

14 Nov 2017

Fed Chair Janet Yellen and other top rate-setters took the stage in Frankfurt to discuss how they communicate. It’s a slightly meta admission of the role speechifying has come to play in monetary policy in an era of ultra-low interest rates. But wordiness brings its own perils.

BNP Paribas earns benefit of capital doubt

31 Oct 2017

A drop in trading profit failed to do much damage at the French bank, which reported an impressive 11.6 pct return on tangible equity in the third quarter. Beating its own return targets, even though they’re modest, should help dispel perennial questions over BNP’s capital level.

Bank of Italy chief’s new term faces uphill start

27 Oct 2017

Ignazio Visco has been reappointed as central bank governor despite political opposition. His first challenge is to quell critics of his handling of Italy’s banking crisis. EU rules are also getting tougher and Mario Draghi’s departure from the ECB in 2019 will remove an ally.

Taylor-led Fed would be dangerous in manifold ways

19 Oct 2017

In addition to the Stanford economist's dogmatic bent for a programmatic monetary policy, John Taylor backs bigger regulatory changes than others in the running to be the next U.S. central bank chief. His laissez-faire ideas about policing Wall Street are loaded with risk.

Heads or tails, Mark Carney loses

17 Oct 2017

British inflation has hit 3 percent, the highest level since 2012. No wonder the Bank of England chief is hinting policy rates may soon rise. Carney’s problem is that he will be criticised for hurting a slow-growing economy if he hikes and accused of inconsistency if he delays.

Cox: Next Fed chair will need unusually thick skin

16 Oct 2017

The debate over who will lead the central bank is narrowly about hawks and doves. Policy matters, but the broader economic benefits of the Fed’s relative independence may count for more. Whoever gets the job will have to resist Trump's bullying – and stop doing Congress's job.

Fed balance-sheet runoff could rock fiscal boat

20 Sep 2017

The U.S. central bank will start shrinking its $4.5 trln bond portfolio next month. The timing is risky, with lawmakers set to spar over government funding and the debt ceiling. Fed downsizing will also cut the $92 bln it sent to Treasury last year, adding to budget pressures.

Breakdown: Killing Libor is a long, messy business

14 Aug 2017

Obituaries for the discredited global benchmark are premature. Its successors will take years to become as ubiquitous as a rate that is still the basis for trillions of dollars of financial contracts. Breakingviews spells out the legal pitfalls – and the trading opportunities.

ABN Amro can profit from blissful domesticity

9 Aug 2017

A thriving Dutch economy and divestments helped the state-owned lender boost first-half net income by 82 pct year-on-year. CEO Kees van Dijkhuizen wants to grow small business lending and ABN’s international operations. Cost-cutting would provide a surer route to earnings growth.

Draghi’s taper tizzy is sign of dangers to come

29 Jun 2017

Comments by ECB chief Mario Draghi drove up bond yields and the euro, despite later protestations that markets had misread him. The ado owes more to investor complacency than fuzzy talk. It highlights traders’ twitchiness and the challenges in withdrawing ultra-loose policy.

Hadas: Time for a big rethink on interest rates

28 Jun 2017

Central banks are told to worry first about prices. The long-term global trend of low inflation makes that a distraction. The right focus now is on weaning investors off the false highs of easy credit and rising asset prices. Part of the withdrawal is making money more expensive.

Draghi’s hints have more clout than Yellen’s deeds

28 Jun 2017

ECB chief Mario Draghi had more market impact by alluding to higher rates than Fed Chair Janet Yellen did by hiking them two weeks ago. That fits a recent pattern: central bankers who have yet to tighten policy are more apt to upset expectations – and that’s what moves prices.