Monetary Policy

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.

Strong U.S. equity returns tell wrong story

13 Jan 2020

The S&P 500 Index rose roughly 30% in 2019, even as over $180 billion drained out of U.S. equity funds. This bumper return is mostly down to falling interest rates – with some help from around $735 billion in stock buybacks. Investors ought to watch flows, not just prices.

Mark Carney has reason to ease before he leaves

13 Jan 2020

The UK economy grew at its slowest annual pace since 2012 in November. The Bank of England boss has one more policy meeting left before Andrew Bailey takes over. Catching up with recent easing by the U.S. Federal Reserve and European Central Bank would be the best handover gift.

Hotter inflation is the best surprise to hope for

2 Jan 2020

The absence of much price pressure is a head-scratcher for the Fed given the tight U.S. labor market. It’s behind debilitating negative interest rates in Europe and Japan. It’s a problem for pension funds, insurers, savers and banks. A mild return would be unexpected but welcome.

Jay Powell has golden chance to avow independence

18 Dec 2019

The Fed boss can distance himself from President Donald Trump by nudging the U.S. central bank to join a global green network that already includes 51 peers. This will defuse criticism that he has been too malleable on rates. And it may even help to save the planet from frying.

Lebanon’s financial alchemy is losing its magic

18 Dec 2019

The world’s third most indebted nation – with borrowings north of 150% of GDP – may be careening toward a default and an IMF rescue. A complex financial engineering scheme that propped up the banking system is now sputtering. Local banks and foreign bondholders could take a hit.

Hadas: Maybe Paul Volcker wasn’t all that great

17 Dec 2019

The U.S. central banker, who died on Dec. 8, supposedly broke the 1970s inflation with recession-inducing high interest rates. After 40 years of falling inflation worldwide, his contribution looks less certain. He also missed an early chance to criticise financial deregulation.

ECB feuding will have a new front in coming year

11 Dec 2019

Christine Lagarde took the helm of the European Central Bank with a promise to review strategy. A debate on how to define its price stability mandate will embolden those rate setters who are fed up of ultra-loose policies. The battle will be bitter and played out in public.

Sweden will manage a singular rate rise

6 Dec 2019

The Nordic country’s rate setters want to lift the policy rate out of sub-zero territory in December. Sluggish growth, lower inflation and trade weakness mean they face a high burden of proof to justify such a move. Their explanation may not stretch to a second hike anytime soon.