Monetary Policy

Shinzo Abe fires off another feeble arrow

5 Dec 2019

Japan’s latest fiscal stimulus package, worth just over $120 billion, will avert stagnation or worse. But a recent consumption tax hike and slower global activity pose risks that policymakers lack the firepower to tackle. Healthy growth and inflation will prove elusive.

Fed’s stability is an appreciating asset

20 Nov 2019

Ambassador Gordon Sondland implicated not just President Donald Trump, but also the vice president and secretary of state in the House impeachment probe. The central bank’s independence should comfort investors – unless Trump starts threatening Chair Jay Powell’s job again.

ECB decisions would benefit from a bit more light

11 Nov 2019

The central bank’s policy-making process is less formal and transparent than peers. New boss Christine Lagarde could change that by holding formal votes. Publishing the results, as the Fed does, would raise problems. But disclosing anonymous tallies would still be an improvement.

Hadas: Sweden raises tone of negative rate debate

6 Nov 2019

Its central bank plans to increase the policy interest rate to zero. Current conventional thinking says that is a step in the wrong direction. But there are reasons to worry about minus signs on rates. If the economy emerges unscathed, others may copy the Swedish experiment.

Fed cut is over-stuffing the cushion this time

30 Oct 2019

Another interest-rate reduction is what traders wanted. But U.S. stocks just hit a record high, the economy is chugging along with solid – if not spectacular – growth, and inflation has crept up. The Fed’s touted data dependency is looking more like addiction to the markets drug.

Mario Draghi’s tacit advice to Christine Lagarde

24 Oct 2019

The outgoing ECB boss says his successor needs no guidance. But his last big news conference contained clues. First, never give up, though economic risks are rife. Second, turn the page on infighting. Third, be wary of financial bubbles. Fourth, expect brickbats, whatever you do.

Bolsonaro’s epic pensions victory may be his last

23 Oct 2019

Brazil’s president has secured a budget-saving $195 bln overhaul of the country’s retirement program. It’s a success that eluded plenty of his predecessors. But the far-right leader’s low approval ratings and endless controversies may make tax and spending reforms a tougher slog.

Christine Lagarde gets lucky with German ECB pick

23 Oct 2019

Berlin is set to nominate Isabel Schnabel to the central bank’s board. The university professor would bring economic expertise, and, judging by public comments, more open views on monetary policy than her Teutonic predecessor. The new ECB president would welcome both qualities.

IMF crystal ball is cloudiest on what matters most

15 Oct 2019

The international lender cut its growth predictions for this year and next. Issues like trade wars and Brexit make it hard to forecast how some of the most advanced economies will perform. If there are stumbles, these are also the countries least likely to heed IMF advice.

Hadas: American wealth tax starts looking doable

9 Oct 2019

What seemed like political theatre at the start of the Democratic debates has gone mainstream, embraced by leading presidential contenders. A capital levy would slow the pace of inequality, if the public mood changes enough. More surprisingly, it might even help the economy.

Breakdown: Fed needs adaptable repo response

8 Oct 2019

Chairman Jay Powell says the U.S. central bank will start buying bonds again to help ensure money markets stay well behaved. The Fed has learned a tough lesson from last month’s spike in repo rates: exiting the era of quantitative easing isn’t going to be easy.

Bank of Japan tests the limits of monetary policy

1 Oct 2019

The weakest Japanese government-bond auction in three years caused global yields to jump. The swift reaction, rooted in uncertainty about new policies designed to keep rates low, should teach Europe a worrying lesson: A bond-purchasing safety net can sometimes be dangerous.

Beijing’s monetary easing path is a conflicted one

20 Sep 2019

China has trimmed its new one-year benchmark lending rate to 4.2%. Policymakers want to boost slowing growth, but without fueling a property or credit bubble. The result is another half-step towards loosening that will disappoint those hoping for a quick stimulus.

Fed wrestles the unpredictable and the unintended

18 Sep 2019

Cutting interest rates again was the easy part. The whimsical trade policy of President Donald Trump and threats to oil supplies call for insurance. But stress in money markets is partly the U.S. central bank’s own handiwork. Chair Jay Powell is discovering the Fed’s new normal.

Money-market wobble is whodunnit without a villain

17 Sep 2019

The U.S. Fed pumped in $53 bln to calm interbank lending after rates spiked. The movements were dramatic, but the many causes look mostly mundane. Banks might use the ructions to argue they deserve a regulatory break. Such ripples, though, can be tolerated, and may have to be.

ECB’s Super Mario channels a new cartoon hero

12 Sep 2019

Mario Draghi unveiled a rate cut and new asset purchases, his parting gift as central bank chief. While he shares a name with Nintendo’s famous plumber, the open-ended buying smacks of Toy Story’s Buzz Lightyear. Markets seem to think stimulus will last to infinity and beyond.

Woke capitalism is a winner in the 2020 campaign

4 Sep 2019

Democratic White House hopefuls blame the U.S. economic system for growing inequality. Their plans target private equity, banks, corporations and the rich. A wealth tax may not be as effective as it looks. But some ideas may start to cut the gap between the haves and have nots.

U.S. manufacturing slump is a self-inflicted wound

3 Sep 2019

American factory activity fell for the first time in three years in August, as President Trump’s trade war with China hit home. Fresh tariffs could compound the woes. At least manufacturing’s role in the economy has shrunk. But that underscores the futility of White House policy.

Bill Dudley blows the U.S. central bank’s cover

28 Aug 2019

The ex-New York Fed boss proposed monetary-policy resistance to Donald Trump’s trade war. To be fair, the president exploded norms first. Yet Dudley, though now a private citizen, has weakened the Fed's apolitical credentials. It paints Chair Jay Powell further into a corner.

New Delhi’s central bank raid helps by half

27 Aug 2019

The record $25 bln being transferred to the government should help Prime Minister Narendra Modi’s stimulus plans. State lenders could use the funds more than the well-cushioned RBI. It would be imprudent to recapitalise them, however, without accompanying governance changes.