Interest Rates

Capital Calls: Reserve Bank of India

6 Apr 2023

Concise views on global finance: The central bank surprised by keeping its key borrowing cost at 6.5%, citing concern about global financial stability.

Sterling’s safe haven status will prove fleeting

6 Apr 2023

Investors have piled into the pound since the start of troubles at US banks, pushing it 5% higher against the dollar. Yet easing turmoil stateside will lead markets to fret more over UK issues: a probable recession, dire long-term growth, and a likely dovish central bank.

Capital Calls: Bank of England, Wonder drugs

23 Mar 2023

Concise views on global finance: The UK central bank has joined peers in raising rates, but there’s not much room to keep hiking. Meanwhile, a drug that might help smokers’ lung is could be good for makers Regeneron and Sanofi, but even better for society.

Market nerves tie US rate-setters’ hands

22 Mar 2023

The Federal Reserve's quarter-point rate hike was the best it could do without creating other issues. Higher rates put more stress on banks, but investors expected such a move. Chair Jay Powell might not like following behind markets, but nor can he afford to surprise them.

BoE’s inflation pickle can taste sweet in Britain

22 Mar 2023

A surprise jump in consumer prices will force the Bank of England to hike interest rates by 25 basis points, rather than pausing. Governor Andrew Bailey can now focus on helping a shaky UK economy by freezing borrowing costs for the rest of 2023 and start cutting them next year.

Lagarde is not for turning; the ECB might have to

16 Mar 2023

The head of the European Central Bank ignored a transatlantic financial rout and hiked rates by 50 basis points. For her, inflation, not banks’ health, is the real problem. She may soon have to worry about the damage her aggressive policy is inflicting on the euro zone economy.

European banks priced for profit dip, not crisis

14 Mar 2023

Lenders’ shares have plunged since Silicon Valley Bank failed, but only to January’s levels. Senior bankers like Lloyds CEO Charlie Nunn see no evidence of a US-style deposit rush in Britain. For investors, the fear is that interest rates don’t rise as far, crimping returns.

Banking turmoil could help euro doves cry victory

14 Mar 2023

With inflation running hot, the European Central Bank looked set to raise rates by 50 basis points on March 16. The collapse of two US banks flipped the script. As investors fear financial instability, the ECB might go easier and rely on previous hikes to curb consumer prices.

US jobs data can spare Fed rate ratchet

10 Mar 2023

A larger-than-expected gain of 311,000 jobs might stoke inflation-fighters’ fears, but slowing wage growth and returning workers show a labor market in the sweet spot. That gives policymakers weighing further hikes in borrowing costs the opportunity to take a patient approach.

Why the dollar keeps winning in the global economy

28 Feb 2023

The greenback’s share of foreign exchange reserves is at 59%, a two-decade low. Challengers to its role as the world’s means of exchange abound. Yet the globalised financial system bolsters its lynchpin status. Absent major shifts in capital flows, the U.S. currency will thrive.

ECB’s inflation-fighting hose may have a blockage

20 Feb 2023

The central bank has hiked rates by 3 percentage points since July, pushing up corporate borrowing costs and squeezing demand for credit. Yet firms and households have longer-term debt than in the past. That means tighter monetary policy will take a while to cool the economy.

Robinhood’s Wall Street bets aren’t yet working

9 Feb 2023

As retail stock trading and crypto have withered, so have the online brokerage’s main sources of income. So it has slashed costs, and staff, and is aggressively launching new products. But for now, it’s rising interest rates – not happy customers – that are holding Robinhood up.

Euro zone can afford to keep fiscal taps running

31 Jan 2023

The bloc’s governments pumped up spending by 3.75% of GDP over the past two years to cushion the blow of Covid-19 and higher energy prices. Now they are closing the spigots. That’s a mistake. Manageable debt costs leave room to support growth – and help the ECB fight inflation.

Capital Calls: McDonald’s, Spotify

31 Jan 2023

Concise views on global finance: The burger chain’s comparable sales growth despite rising prices proves there’s pricing power at the bottom of the market; shares in the $21 bln music-streaming service leapt after founder Daniel Ek unveiled rapid subscriber growth.

Davos, Inc. finds reasons to be less gloomy

20 Jan 2023

Business leaders gathering in the Swiss mountain resort have plenty to fret about. Still, with China reopening, Europe keeping the lights on and interest rate pressure easing, the overriding emotion is one of relief. Less clear is whether the mood extends beyond the alpine elite.

Bank of Japan has learnt danger of half-measures

18 Jan 2023

The central bank’s decision to stay put on interest rates saw the yen soften and hurt 10-year bond yields. Last month’s surprise tweak to bond trading bands failed to impress traders. Inaction may be painful and expensive, but muddled economic signals make it understandable.

European stocks will defy bonds’ revival

16 Jan 2023

In the past decade, Western equities delivered far better returns than bonds. An ongoing central bank crusade to fight inflation points to a fixed income comeback in 2023. Yet cheap valuations and ECB rates hesitancy will help European stocks steal a march on local bonds.

European inflation control is a double-edged sword

6 Jan 2023

Prices in Spain or France have risen less than in other big euro zone economies. One reason is lower dependence on Russian energy, but government price controls also helped smooth the shock. The risk is that suppressed inflation will catch up after the crisis subsides.

Macron’s fiscal torpor will weaken France

29 Dec 2022

The French president is running the only big European economy whose public debt, now at 112% of GDP, is still rising. High government spending helped during the crises but is now pushing up bond yields, stifling growth. Budget neglect will also erode Paris’s influence in the EU.

Bond-buying scars will open European can of worms

16 Dec 2022

The ECB faces large losses if it keeps hiking interest rates, because of higher payments to banks on 3.9 trln euros of reserves amassed through asset purchases. National central banks will pick up the tab. And governments will bicker on how to share the pain.