Interest Rates

ECB, BoE will fight to regain anti-inflation mojo

15 Dec 2022

The European Central Bank and the Bank of England hiked rates by 50 basis points, less than recent jumbo increases. Recession fears, and the central banks’ initial hesitancy, are making investors sceptical of a sustained tightening. Sticky inflation will prove them wrong.

ECB will have to stay laggard in bond-buying exit

13 Dec 2022

The central bank will explain how it will cut its 5 trln euro bond pile on Thursday. Frankfurt’s stimulus reduction plans are behind the Fed and the BoE. It should not rush to catch up. Markets are calm but rising rates and a surge in issuance raise the risk of a tantrum.

Betting against the Bank of Japan

13 Dec 2022

Investors are closely watching for signs that Tokyo might finally start winding down its ultra-low interest rates as inflation rises. In this Exchange episode, Pete Sweeney chats with Sayuri Shirai, former BOJ policy board member, about whether and how Japan might adjust.

Inflation confusion increases odds of ECB mistake

30 Nov 2022

Euro zone prices rose a less-than-expected 10% in November, yet remained stubbornly high after stripping out fuel. That leaves central bankers in a pickle. To burnish their hawkish credentials with a sceptical market, they may keep tightening policy even as the economy falters.

Capital Calls: Fuzzy Fedspeak, Dr. Martens

24 Nov 2022

Concise views on global finance: The U.S. central bank has left traders guessing the meaning of the word “various”; shares in the recently listed British bootmaker fell 20% after sales missed expectations, and a warning that its investment needs will hurt profitability.

Hybrid working is wild card in office slump

21 Nov 2022

Workspace landlords like British Land and France’s Gecina are facing a storm. Higher interest rates are cutting property values, just as a weak economy pushes up vacancy rates. And, with UK workers spending half their week at home, employers have plenty of scope to cull space.

BNP defies French banks’ interest-rate malaise

3 Nov 2022

The 60 bln euro lender’s top line is rising handily. That’s partly because CEO Jean-Laurent Bonnafé has tilted BNP Paribas away from Gallic retail banking, where regulations restrict its ability to earn more as rates rise. A valuation premium to local rival SocGen looks assured.

Europe’s diverging prices complicate ECB’s task

1 Nov 2022

Inflation is running at 7% a year in France and 22% in Estonia. These differences make the European Central Bank’s stance too aggressive for some states and too timid for others. The controversy about monetary policy will only intensify as the ECB pushes rates higher.

Europe’s pain will be ultimately worth it

31 Oct 2022

The European Union faces a tough period as the energy crisis bites and debt troubles return. But the bloc could have the world’s cheapest and cleanest energy by the mid-2030s and it will probably emerge stronger geopolitically, says Hugo Dixon.

Capital Calls: NatWest nerves

28 Oct 2022

Concise views on global finance: Shares in the government-backed UK lender fell 8% after it revealed an impairment charge 43% above what analysts had expected.

Risky debt selloff has much further to run

28 Oct 2022

Investors are dumping corporate bonds as interest rates rise. Relatively safe investment grade securities have fallen harder than those issued by junk-rated borrowers, which hit $650 bln last year. That will reverse as high-yield debt starts pricing in defaults and a recession.

European banks’ perfect moment will prove fleeting

26 Oct 2022

Rates are rising, traders are busy, and customers are paying their debts. That helpful backdrop helped Barclays, Deutsche and Santander average a punchy 11% return on tangible equity so far in 2022. But with recession looming, and bad-debt buffers looking low, it may not last.

Bank mortgage tweaks presage bigger political hit

14 Oct 2022

Spain’s CaixaBank proposed a rate freeze, while UK lenders favour ad hoc relief for struggling borrowers. As interest costs soar, these won’t be enough to avoid a mess. Since cash-strapped governments can’t help, they may hammer banks with Polish-style blanket payment holidays.

Bernanke bank-crisis Nobel requires markets sequel

10 Oct 2022

The former Fed chair and two fellow economists won the prize for showing how lenders can fail and cause a depression. Bernanke put theory into practice in 2008, averting a slump. But ultra-low interest rates built up financial risks which are only now becoming fully apparent.

Interest rate delusion may be biggest error of all

6 Oct 2022

Bear markets occur when a previously dominant idea is proven wrong. The current selloff in bonds and stocks reflects the mistaken belief that the cost of money would stay low. For investors, the full consequences of that colossal mistake are unknowable, says Edward Chancellor.

The end of cheap money reveals global debt problem

3 Oct 2022

Borrowing has risen to more than 250% of world GDP, far more than before the 2008 financial crisis. Rising interest rates and low growth make this burden harder to bear, causing economic stress in Europe, China and the Global South. This will poison geopolitics, says Hugo Dixon.

BoE remedy can only be partial cure for UK ills

29 Sep 2022

The UK central bank launched $70 bln of bond-buying after PM Liz Truss’s budget triggered market chaos. That has stemmed a financial crisis among indebted pension funds. Stopping the market exerting economic pain requires a fiscal rethink from politicians, not more BoE action.

Behind Britain’s self-inflicted financial crisis

28 Sep 2022

Sterling fell to a record low and gilt yields soared after finance minister Kwasi Kwarteng unveiled a raft of unfunded tax cuts. In this Viewsroom podcast, Breakingviews columnists explain the long-term damage to the UK’s credibility and what will rebuild investors’ confidence.

BoE’s bond-buying U-turn is worth the risk

28 Sep 2022

The Bank of England will buy UK sovereign debt and delayed sales of its $915 bln bond portfolio due to market “dysfunction”. The danger is Governor Andrew Bailey looks too close to the government whose tax cuts caused the turmoil. Yet calmer markets make it easier to hike rates.

UK swaps one cost-of-living crisis for another

27 Sep 2022

The Bank of England may raise rates past 5% to stem the inflationary effect of Chancellor Kwasi Kwarteng’s tax cuts. Homeowners, saved by the government’s energy price cap, now face a surge in mortgage costs. That will sap growth and add to pressure for banks to help customers.