Monetary Policy

Bank of England deploys old tools for new problem

19 Mar 2020

New boss Andrew Bailey has cut UK interest rates to 0.1% and ramped up bond buying. Among the reasons for the easing is a deterioration in the government debt market that is leading to a tightening of financial conditions. Even massive asset purchases may not fix that headache.

Next G7 headache is a disorderly currency market

19 Mar 2020

The dollar is surging amid a dash for cash. Exchange rate swings are verging on the sort of unruly moves that policymakers say they dislike. Public expressions of displeasure can be the first line of defence. If these don’t work, official sales of the U.S. currency may be needed.

Christine Lagarde proves a worthy heir to Draghi

19 Mar 2020

The ECB boss echoed her predecessor’s “whatever it takes” pledge by unveiling 750 billion euros of new asset purchases. That eases tension in euro zone bond markets but can’t offset the global dash for cash. Crucially, she also opened the door for other once-taboo measures.

Fed will struggle to open discount window wide

16 Mar 2020

The eight biggest U.S. lenders are tapping the central bank’s emergency facility to help reduce its stigma. Ones that used the program during the financial crisis were publicly shamed. The likes of JPMorgan are setting a good example, but may not persuade smaller peers to follow.

Fed’s market fixes leave biggest problem unsolved

16 Mar 2020

Chair Jay Powell wants to ensure an ample global supply of dollars and avoid a repeat of last week’s U.S. bond market disorder. But measures like asset purchases will at best mitigate the stress. The root of tensions is the risk of companies going bust because of the coronavirus.

Chancellor: Monetary cure carries risk of its own

16 Mar 2020

Central bankers aren’t arguing that slashing rates and printing money will resolve the coronavirus panic. But the experience of the 1970s oil crisis suggests meeting a severe global supply shock with fiscal activism and easy money may bring inflation back in a nasty way.

Christine Lagarde makes hard ECB job even harder

13 Mar 2020

A blunt remark by the European Central Bank chief drove up Italian bond yields - the last thing she wanted. She could get away with not knowing what pushes traders’ buttons when markets were placid. But that lacuna means she’s facing a crisis saddled with a credibility deficit.

Central bank largesse is mixed bag for EU lenders

13 Mar 2020

Christine Lagarde and Mark Carney are giving banks free money and capital relief to fight a virus-induced slump. Investors will see few benefits, though. Higher dividends are taboo, and cheap funds will finance lower-cost loans. Balance sheets have become a social safety net.

ECB’s stealth easing enlists banks in virus fight

12 Mar 2020

President Christine Lagarde left interest rates unchanged but used other tricks to support the euro zone economy through Covid-19. Lenders can borrow at sub-zero rates and dip into capital and cash buffers. They have every incentive to help her limit the damage from the slowdown.

Mark Carney’s joined-up thinking does what it can

11 Mar 2020

The outgoing Bank of England boss unexpectedly eased policy with measures that used most of his armoury. It came just before finance minister Rishi Sunak unveils steps to help the economy deal with virus disruptions. Euro zone policymakers struggle to act with such unity.

Japan is stuck with curse of safe-haven yen

11 Mar 2020

Anxious investors have flocked to the currency, fuelling a rally that could hammer exporters. Tokyo will struggle to persuade other major industrial nations the yen is overvalued, so won’t win their help to curb the move. Solo action won’t work. Only calmer markets can help.

Oil shock gives central banks excuse to be bold

9 Mar 2020

Crude prices plunged days before the ECB meets. While Christine Lagarde and her global peers are supposed to look beyond one-off jolts, inflation expectations have been crushed in a market already gripped by virus fears. That gives rate-setters another reason to be decisive.

Viewsroom: Fear factor

5 Mar 2020

U.S. Fed Chairman Jerome Powell surprised markets with a rate cut ahead of schedule. Democratic presidential contender Joe Biden unexpectedly won the most states on Super Tuesday. Covid-19 may show up in China M&A clauses. The coronavirus is inspiring flights to safety.

Fed playbook will need a new page on zero rates

5 Mar 2020

Chair Jay Powell is likely to follow up this week’s emergency rate cut with more. It’s a case of when, not if, the U.S. central bank will revisit 0%. There are tactics it can try before going negative like euro zone and Japanese peers. The problem, though, is diminishing returns.

Fed easing shocks more than it awes

3 Mar 2020

U.S. central bank boss Jay Powell cut rates by half a percentage point because of economic risks from the coronavirus. Easing from the provider of global financial liquidity sets the scene for others to follow. The impact would have been bigger had G7 peers acted simultaneously.

Trump budget melds good, bad and pointless

10 Feb 2020

The U.S. president’s $4.8 trillion budget for fiscal 2021 plays to his base – with funding for his wall and cuts to the safety net. The budget is mostly anti-growth, and has little chance of passing. But his call to fund research on advanced technology is an idea worth saving.

The Exchange: Anthony Scaramucci

10 Feb 2020

We last spoke to the founder of SkyBridge Capital a week before Donald Trump won the U.S. presidential election. When asked if he would take a White House job if Trump won, he said no – unless it was Ambassador to the Vatican. So, when in Rome, Rob Cox sat down with “The Mooch.”

Venezuela’s creeping reforms offer false hope

4 Feb 2020

A rum distiller just launched the country’s first public equity deal in 11 years. Banks are managing dollar accounts again. The government is relaxing price controls and might be loosening its grip on its state-owned oil giant. But it’s more kleptocracy rather than real change.

Fed’s failure to communicate overshadows QE debate

30 Jan 2020

The U.S. central bank has been gobbling up about $60 billion in treasury bills a month since October. Whether this is technically quantitative easing is less important than the Fed’s struggle to control its message. This could undermine its effectiveness when it’s needed most.

Eerie currency calm jeopardises more banking jobs

30 Jan 2020

Major exchange rates have been relatively stable because economies are moving in synch and global monetary policy is broadly accommodative. That makes foreign exchange less of a money-spinner for banks. Expect the ranks of FX traders and sales staff to shrink further.