Monetary Policy

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.

Trump’s chaos theory of negotiation is a dead end

26 Aug 2019

The U.S. president says trade talks are back on with Beijing three days after escalating tariffs and calling Chinese leader Xi Jinping an “enemy.” Yet his erratic aims and tenor make it hard for counterparties to engage, as the G7 demonstrated. It’s no way to strike a good deal.

Fed chief crafts central banker’s serenity prayer

23 Aug 2019

Jay Powell hopes to control what he can and rise above what he can’t. His speech at Jackson Hole highlighted trade battles, which he can’t influence, as a new challenge for rate-setters. But his tone suggests more willingness to weigh policy threats when shaping monetary policy.

Viewsroom: How to read the recession runes

22 Aug 2019

A U.S. downturn is near, judging by past early warning signals from yield curves to bank valuations. But fallout from the 2008 crisis has sapped them of some predictive power. Plus: what the exit of Cathay Pacific’s CEO says about Beijing’s response to the Hong Kong protests.

China’s rate reform inches along the market path

19 Aug 2019

The central bank is shaking up loan pricing, pushing aside a long-standing benchmark set by officials. It’s an overdue step designed to ease credit conditions and help companies borrow. Transmission problems remain, but a move closer to a more responsive system is welcome.

Wall Street adds $125 bln to recession conundrum

16 Aug 2019

That’s the market value lost by the top five U.S. investment banks in just three weeks, leaving only JPMorgan trading above book value. History suggests it’s an early investor bet on a downturn. But as with the yield curve, the fallout from the last crisis distorts the message.

U.S. recession signal bears clear fingerprints

14 Aug 2019

A key bond-market metric flashed a downturn warning last seen in 2007, hammering stocks. Business confidence and investment are dropping, China is slowing and Germany’s output just fell. The common thread linking these is Donald Trump’s trade war. At least he’ll win lower rates.

German weakness gives ECB carte blanche to be bold

14 Aug 2019

Europe’s biggest economy shrank in the second quarter as global trade tensions hurt export-orientated manufacturers. The problems will filter through to other sectors. That will lessen any Teutonic resistance to European Central Bank boss Mario Draghi’s planned monetary easing.

IMF stitch-up would set at least one good example

5 Aug 2019

Kristalina Georgieva, Europe’s pick to lead the lender, is a technocrat who lacks former Managing Director Christine Lagarde’s stature and clout. But the IMF would have to raise its age ceiling for her – about time for a body that prods countries to raise retirement ages.

Jerome Powell finds another way to please nobody

31 Jul 2019

The Fed chief presided over a quarter-point interest-rate cut on Wednesday, disappointing investors, presumably the president, and even some colleagues. Most people have enough worries, real or not, to want lower borrowing costs. Most economic statistics, though, say not yet.

Aussie monetary future is everyone else’s past

31 Jul 2019

Australia managed to avoid the ultra-low rates other countries have shouldered for years. Now growth is slowing, and it is up against the limits of conventional policy. An improvement in second-quarter inflation and a cheerier end to 2019 won't change the need for new tools.

Undoing Trump’s tax cuts harder than it looks

30 Jul 2019

Democratic presidential contenders want to scrap the White House’s signature legislative win. The measure helped companies and the wealthy but also provided some breaks for the middle class, making it tricky to roll back. And a corporate tax hike could trigger a market downturn.

Hong Kong fills best worst job in central banking

26 Jul 2019

As the new head of the HKMA, Eddie Yue is on track to get a salary that puts U.S. Fed chief Jay Powell in the shade. A pegged currency means he needn’t fret much about rate-setting or attacks on his independence. The catch: if problems really escalate, he has fewer tools.