Monetary Policy

Only a twin-track approach will rescue UK economy

2 Nov 2020

Finance minister Rishi Sunak will spend more to soften the impact of a new lockdown and the Bank of England is likely to loosen policy again. It won’t stop insolvencies or economic scarring. Retraining workers of all ages and encouraging productivity-boosting investment is vital.

Europe virus defences can manage one more lockdown

29 Oct 2020

France and Germany are imposing tough restrictions to stem the pandemic. The economic shock should be milder than the first Covid-19 crisis, and government spending and the ECB can cushion the blow. Yet the region would struggle to cope with a protracted shutdown.

Review: Picking the turning point in inflation

16 Oct 2020

In “The Great Demographic Reversal”, Charles Goodhart and Manoj Pradhan make a good case for why prices will take off. Ageing societies need more carers and labour scarcity may finally lift wages. But they’re perhaps too sanguine on how soon pandemic-stricken economies can heal.

Corona Capital: Oil, Delta, Hunger

13 Oct 2020

Concise views on the pandemic’s corporate and financial fallout: OPEC and the International Energy Agency issue forecasts that bode ill for crude demand; the U.S. airline steers through turbulence; and a food crisis is exacerbating problems facing the most vulnerable in society.

The Exchange: The long wait for inflation

6 Oct 2020

Charles Goodhart and Manoj Pradhan tackle an issue perplexing policymakers and investors: if, and when, price pressures will rise. The authors of “The Great Demographic Reversal” discuss ageing societies, emerging economies, and why the world won’t follow in Japan’s footsteps.

ECB’s valiant “lowflation” brainstorm has a flaw

30 Sep 2020

President Christine Lagarde outlined several ways the central bank’s strategy might adapt to a world where prices rise too slowly, not too fast. For all its merits, the exercise assumes rate-setters have full control over inflation. The past decade shows they don’t.

The Exchange: Inflation nation

22 Sep 2020

The Fed’s new rate-setting philosophy is a game-changer, and hawks have become an endangered species in D.C. So argues David Kelly, chief global strategist at JPMorgan Asset Management. The central bank may boost inflation, he suggests – but its blunt tools could cause damage.

Corona Capital: Newspaper rivals, College football

17 Sep 2020

Concise views on the pandemic’s corporate and financial fallout: the Wall Street Journal hits up the New York Times’ printing presses; U.S. college football’s Big Ten makes a comeback.

Jay Powell kills inflation-focused central banking

27 Aug 2020

The Fed chief will now accept overshoots above the 2% target that his monetary policy has in any event failed to hit. Instead, the U.S. central bank’s new mission statement targets robust labour markets more aggressively. It's a recipe for ultra-easy policy more of the time.

Fed policy review will leave market put untouched

26 Aug 2020

Chair Jay Powell’s every utterance is being scoured for hints of whether a new framework will introduce innovations like average-inflation targeting. But one thing won’t change. Rate setters will backstop markets, as they have done for a decade, and investors are counting on it.

Guest view: Freeing Abenomics from Abe

26 Aug 2020

Japanese Prime Minister Shinzo Abe’s return to hospital has raised concerns about a change of power. His signature economic policy fell short even before the pandemic. A strong successor could reinvent it, but that seems unlikely, argues ex-BOJ policy board member Sayuri Shirai.

The Exchange: Stephanie Kelton

11 Aug 2020

As budget deficits swell, one of the highest profile advocates of Modern Monetary Theory joins Swaha Pattanaik to discuss her approach to public finances, U.S. presidential hopeful Joe Biden’s economic agenda, how her thinking evolved, and her experience of academic gatekeeping.

Does $20 trillion buy much inflation?

11 Aug 2020

The market’s answer is a firm no. Global stimulus worth over 20% of world GDP has been unveiled, on Bank of America’s numbers. Future price expectations are rising but have yet to bust central bank targets. These low readings show the continuing mystery of inflation’s causes.

Can the Fed help close the racial prosperity gap?

22 Jul 2020

Economists advising U.S. presidential hopeful Joe Biden have proposed making racial equity part of the Federal Reserve’s mandate. That chimes with the zeitgeist. But if it means rate-setters ignore too-high inflation for too long, it could hurt those Biden aims to help.

EU has fairness vs. speed dilemma on pandemic cash

17 Jul 2020

Brussels wants to use backwards-facing metrics like past jobless rates to assign 310 bln euros of Covid-19 grants. Basing handouts on EU states’ actual hits to GDP would be fairer, and may win richer countries’ support. For needier peers, that risks slowing down the recovery.

How to revamp the EU’s fiscal rules

16 Jul 2020

The pandemic makes the often-ignored cap on government debt at 60% of GDP look even more anachronistic. But axing fiscal rules entirely would strain the euro zone. Better to regularly review countries’ ability to sustain their public debt and offer incentives for wiser spending.

Indonesia cautiously crosses central bank rubicon

9 Jul 2020

Bank Indonesia will buy $28 bln of bonds directly from the government, breaking a long-held taboo. It will refund interest gains, and the securities will be tradeable, providing price transparency. That’s about as credible as an emerging market monetary authority can hope to be.

Hadas: A virus economic optimist partly recants

8 Jul 2020

Three months ago, it felt bold to predict little lasting damage from the pandemic. Money-fuelled markets have embraced that outcome, but pumped-up hopes are now too high. Global finance is undisciplined, fear and bitterness lurk, and governments may have gained too much power.

Fed keeps yield-curve control in back pocket

2 Jul 2020

Minutes of the U.S. central bank's June meeting suggest ambivalence about the policy. It’s unnecessary for now, with bond markets quiescent. If that changes, Japan’s experience shows the tactic can effectively cap long-term interest rates. But it may not deliver higher inflation.

Ukraine central banker exit is nail in reform hope

2 Jul 2020

Governor Yakiv Smoliy quit, citing political pressure. He tamed inflation and stood up to the former owners of nationalised PrivatBank. His resignation scuppered a bond issue and puts a $5 bln IMF loan at risk. Opaque vested interests are winning out over transparency in Kyiv.