Monetary Policy

Japan’s stock market faces a moment of truth

5 Aug 2024

Equities are falling fast as central banks rapidly recalibrate monetary policy and fears rise of a hard landing for the US economy. Japan Inc’s historic bull run was supported by a weak yen. The currency’s sudden reversal will reveal how much substance is beneath the froth.

Reluctant rate cut leaves the BoE with a lot to do

1 Aug 2024

The Bank of England lowered borrowing costs to 5% – its first such move since the pandemic. But division in its ranks and Governor Andrew Bailey’s cautious tone imply further easing will be slow. Given the fall in inflation, that will unnecessarily crimp Britain’s weak recovery.

China’s leaders pitch their tent in a rainstorm

25 Jul 2024

The five-yearly Communist Party meeting known as the Third Plenum is historically tied with economic policy shifts. Slowing growth and rising trade tensions make the timing apt. In this Viewsroom podcast, Breakingviews columnists discuss what the event means for China’s future.

China’s slump hints at a unique liquidity trap

25 Jul 2024

Record money supply has failed to revive growth. As the impact of monetary loosening fades, Beijing is ready to spend on welfare to encourage savers to consume. Inspiring the private sector to invest in a ‘socialist market economy’ is a trickier part of the problem to solve.

China stocks’ ‘policy put’ is breaking down

24 Jul 2024

Chinese markets' bull run has come undone as hopes for significant stimulus crumble. Without follow-through on vows to shore up the economy, trading cycles could grow shorter and more volatile as speculators race to profit off fleeting rallies spurred by signals from Beijing.

China rate cuts usher in next stimulus stage

22 Jul 2024

Days after Party leaders unveiled sweeping pledges to revive the $17 trln economy, the central bank unexpectedly cut key lending rates. It's a modest move but helps the PBOC establish a new benchmark and signals Beijing's urgency to speed up reforms. More policies will follow.

Inflation teaches five lessons for the next crisis

16 Jul 2024

After taming a 9% rise in prices without breaking economies, US Fed Chair Jay Powell and other central bankers are poised to pat themselves on the back. There’s also an opportunity to improve the playbook. Among the useful takeaways: embrace taciturnity, flexibility and humility.

China’s weak economy awaits new remedies

15 Jul 2024

Growth slowed to 4.7% in the second quarter. Real estate woes endure and lacklustre consumption points to a greater reliance on exports. Policymakers can still hit their annual GDP target, but the sobering data ups the stakes for fresh fixes from this week’s Third Plenum.

Global economy finds new ways to keep growing

8 Jul 2024

Despite fears of a slowdown, world GDP is expanding at 3.5% a year, faster than in 2023. As the US engine loses thrust, Europe and emerging markets are picking up. A sluggish China and geopolitical confrontations are risks. But for now, investors can enjoy a Goldilocks moment.

Bond traders’ rate-cut party is yet to get going

26 Jun 2024

Central banks from Ottawa to Frankfurt are reducing rates. Bond prices should be rallying, but an index of euro zone debt is up just 0.1% since the ECB eased borrowing costs this month. While French elections are one reason why, tight US monetary policy is the key constraint.

Jerome Powell goes from astrophysics to stargazing

11 Jun 2024

Price pressures and a strong job market complicate the US central bank’s job. But it’s getting harder to delay interest-rate cuts after telegraphing them last year. Forecasts due Wednesday are pivotal. Muddled data ahead of the November election may sideline the Fed chairman.

Russian bond rout raises risk of financial crunch

4 Jun 2024

Yields on the country’s debt are at 20-year highs on worries about the budget largesse lavished on the economy. With inflation rising and interest rates at 16%, President Vladimir Putin’s desire to keep funding the conflict in Ukraine could result in lasting fiscal turmoil.

ECB has almost vanquished its final inflation foe

30 May 2024

Steeper bills for hotels, transport and other experiences are the European Central Bank’s key remaining enemy. Last month, services accounted for 68% of the rise in consumer prices. But those pressures, and wage growth, are waning, freeing rate-setters to start a series of cuts.

Fed should be independent, not untouchable

28 May 2024

Allies of Donald Trump want to blunt the Federal Reserve’s autonomy if the former US president wins a second term. That would be economically disastrous. But a mighty central bank with a $7 trln balance sheet requires better scrutiny, especially outside monetary policy.

China’s new property fix is a work in progress

20 May 2024

Local governments can now borrow up to $138 bln to buy unsold homes. It's the strongest signal yet that Beijing is determined to revive the country's ailing housing market. The amount is not enough. But it lays the foundations for providing more support as needed.

The dollar and the yuan are polar opposites

16 May 2024

The strong greenback and questions over a Chinese devaluation reflect the contrasting outlooks for the two economies. In this Viewsroom podcast, Breakingviews columnists debate why Beijing is unlikely to push down its currency and why the dollar will remain elevated.

BoE cavalry will arrive too late for Rishi Sunak

8 May 2024

After a local polls rout, the UK prime minister badly needs an economic boost before this year’s national elections. But Bank of England Governor Andrew Bailey will only cut rates when inflation drops from the current 3.2%. By then, it could be too late for the government.

Europe has little to fear as ECB and Fed part ways

7 May 2024

The European Central Bank is set to cut rates before the US Federal Reserve for the first time in its history. Hardliners warn that will weaken the euro and feed inflation. But the effects are likely to be muted. Besides, a lower currency helps exports more than it hurts imports.

US economy is a victim of its own success

25 Apr 2024

The United States emerged as the world’s growth engine at the IMF summit last week. In this Viewsroom podcast, Breakingviews columnists debate whether this debt-fuelled strength means that interest rates will stay high for longer and how that could raise the risk of a recession.

European banks have little to lose from rate cuts

25 Apr 2024

Tighter monetary policy boosted revenue at BNP Paribas, Deutsche and Barclays, who now face ECB and BoE loosening. Markets expect some 50 basis points of rate cuts, but that shouldn’t hurt bank income much. Deposits may get cheaper, while old loans keep rolling onto higher rates.