Interest Rates

UK banks are appropriate airbag for mortgage crash

27 Jun 2023

British politicians are starting to call out lenders that have delayed passing on higher rates to savers, even as they charge borrowers more. Bank share valuations already implied such windfalls might be temporary. The sector’s rising margins justify some political arm-twisting.

Interest rates have broken the global wealth pump

23 Jun 2023

The world has been through a second Gilded Age where the rich got richer, helped by ultra-low interest rates. In the past, such episodes ended in revolution or civil war. This time, higher borrowing costs can bring about a painful but peaceful transition, says Edward Chancellor.

China stares hard at its own lost decade

23 Jun 2023

It’s tinkering with interest rates but holding off from deeper measures needed to stimulate the economy including propping up real estate or bailing out local governments. As consumption remains depressed and investment falls, the country faces slipping into a downward spiral.

Firefighting leaves central banks on shaky ground

22 Jun 2023

Policymakers in the UK, Switzerland, Norway and Turkey all hiked rates on Thursday. Stubborn inflation gives them little choice, even though they may cause recessions. In London and Ankara, ratesetters’ job is made much harder by politicians’ own failures and need for scapegoats.

Credibility crisis requires BoE to write new plot

20 Jun 2023

The Bank of England’s inflation outlook is faulty because it relies on traders’ expectations. That leads markets to overreact to data, causing pain for homebuyers and firms. Adopting the US system, where policymakers make predictions, would curb policy mistakes and volatility.

Fed’s pause is now easier to extend

14 Jun 2023

Chair Jerome Powell’s rate-setting crew snapped its long streak of hikes. With the banking crisis stabilized, the FOMC can refocus on prices. Inflation persists, but is moving in the right direction, and there’s less reason to hew to investors expecting a fresh increase in July.

ECB’s autopilot raises risk of hard landing

14 Jun 2023

The European Central Bank is set to hike rates on Thursday and again in July. But traders’ hopes for cuts soon afterwards may be dashed, given pressure from hardline countries to tame stubborn inflation. Europe’s recovery is looking increasingly fragile.

Rich spending will buoy pesky inflation

13 Jun 2023

US prices rose 0.1% last month, suggesting inflation is slowing. Yet hotel and dining costs show Americans are still spending. That’s likely because high earners’ wages are moving in the right direction. They’ll keep pushing up prices, complicating the economic picture.

Flailing property firms make for risky buyout prey

13 Jun 2023

Shares in Swedish landlord SBB crashed, while listed European peers also trade at heavily discounted valuations. It looks like a golden opportunity for private funds, with $700 bln of cash. The tough part will be securing debt financing and avoiding catching a falling knife.

Central bankers face a balance sheet reckoning

26 May 2023

Assets held by central banks have exploded since 2008. As interest rates rise, some of those institutions are slipping into the red. We’re told normal accounting rules do not apply. However, losses erode inflation-fighting credibility and independence, argues Edward Chancellor.

BoE pioneers can make a virtue out of uncertainty

11 May 2023

The Bank of England is living a central bank nightmare. Inflation is 10.1% but growth is stalling. After hiking by 25 basis points, its best option is to avoid the playbooks of US and European peers, pause and be ready to loosen or tighten policy based on what the economy does.

Lagarde fine-tuning will aid sputtering euro zone

4 May 2023

The European Central Bank’s move to raise rates by just 25 basis points and speed up its exit from bond-buying signals a less aggressive approach. High inflation calls for more hikes, but Frankfurt’s decision to use a scalpel rather than a hammer will benefit Europe’s economy.

ECB risks interest-rate blunder after messy data

2 May 2023

The European Central Bank is none the wiser following a raft of new numbers. Lenders may be reining in credit, but headline inflation is rising. Hardliners will still push for a 50 basis point hike on Thursday. The uncertain conditions call for an increase half that size.

Capital Calls: Exxon, US regional banks

28 Apr 2023

Concise views on global finance: Exxon’s two golden eggs are the Permian and Guyana; market composure gives time for a First Republic fix.

Dollar bulls are praying for a mild downturn

26 Apr 2023

The greenback has lost 14% versus the euro since September, as investors bet on Europe’s recovery and China’s reopening. Inflation and interest rate trends still favour the single currency. The best hope for the buck is a minor economic slowdown to boost its safe haven status.

Politicians and policy wonks diverge on economy

20 Apr 2023

Prominent policymakers and world leaders met in Washington last week to discuss the economic outlook. In this Viewsroom podcast, Breakingviews columnists explain why US politicians are taking a rosier view of inflation and vulnerabilities in the banking sector than the IMF.

A flawed but useful economic model for a bleak age

14 Apr 2023

Ideas become fashionable when they meet the needs of the era. John Cochrane’s fiscal theory, which states that governments ultimately determine the level of inflation, fits the bill. Despite its shortcomings, the model may be helpful, says Edward Chancellor.

Capital Calls: UnitedHealth, ETFs, Animal drugs

14 Apr 2023

Concise views global finance: Health insurer UnitedHealth continues to flex its muscles; Canada traps investors inside exchange-traded funds; private equity firm EQT buys into medicine for pets.

Commercial property pain is only just beginning

13 Apr 2023

Valuations of offices and shopping malls are under threat as rising interest rates ratchet up the cost of buying real estate. In this Viewsroom podcast, Breakingviews columnists discuss how inflation and remote working could make the crisis far worse than 2008.

A top tip for central banks: talk less, smile more

11 Apr 2023

Investors’ obsession with policymakers’ hints about future interest rate movements is fueling market volatility. As bank failures and inflation upend forecasts, officials can take a more muted approach. It will help them steer the economy without disturbing financial stability.