Monetary Policy

Hadas: Fresh thinking can soften next downturn

12 Jun 2019

As the Federal Reserve and ECB get ready to loosen policy, their armouries look depleted. Modern monetary theory suggests the cost and quantity of money matter less than putting it in productive hands. How? With targeted financial regulation and fruitful government spending.

Fed could do worse than mimic Donald Rumsfeld

5 Jun 2019

George W. Bush’s defense secretary famously talked of known knowns, known unknowns, and unknown unknowns. The U.S. central bank, seeking better communication, could borrow the categories. They help explain why markets now expect interest-rate cuts while Fed rate-setters don’t.

Imagine choosing Mario Draghi’s successor on merit

29 May 2019

The race to replace the European Central Bank boss is underway. Finland’s Olli Rehn says competence, rather than nationality, should decide the choice. Breakingviews ranks the candidates on policy experience, open-mindedness, and their ability to cajole investors and citizens.

Central banks’ plain talking has perils

28 May 2019

Monetary policymakers increasingly want to speak directly to the public, partly to defend and justify their independence. A conference in Ukraine showcased this desire – but also the resulting imperative to speak more simply. Stripping away nuances and caveats may backfire.

The Exchange: John Taylor

13 May 2019

The economist and leading proponent of a rules-based strategy for monetary policy recently convened a powwow at Stanford’s Hoover Institution at which top policymakers brought diverse views on the Fed’s conduct to the fore. He fillets some of the choicest bits with Rob Cox.

Picking the next Bank of England chief

24 Apr 2019

The hunt is on for a replacement for Governor Mark Carney, who leaves in early 2020. Breakingviews’ interactive yardstick helps sift through the runners and riders.

How to pick the next Bank of England chief

24 Apr 2019

The hunt is on for a replacement for Governor Mark Carney, who leaves in early 2020. Only talented economists with top-notch central bank experience need apply. Creativity and grit are also required. Breakingviews’ interactive yardstick helps sift through the runners and riders.

Climate risk gets the right kind of oversight

18 Apr 2019

Central banks presiding over almost half the planet’s GDP plan to treat global warming as a threat to financial stability. It’ll add heft to existing pressure from investors and make it harder for companies and their lenders to ignore the longer-term impacts of climate change.

ECB sop to banks will only help at the margin

10 Apr 2019

President Mario Draghi is considering ways to ease the pain that negative policy rates inflict on banks, such as tiered deposits in Japan and Sweden. Savings-rich German lenders would benefit most. But any earnings boost would be modest and does nothing to remedy high costs.

Hadas: Biased central bankers beat foolish ones

10 Apr 2019

President Trump’s pick of loyal supporter Herman Cain as a U.S. Fed governor is a bad idea. Not because of his partisan bias, since central banks are inherently political. But monetary policy is too poorly understood and unpredictable to be entrusted to amateur ideologues.

Italy’s debt conundrum will again rear its head

10 Apr 2019

Rome has admitted its economy will barely grow in 2019, a climbdown from forecasts. That makes it harder to keep debt in check, cut income tax, and avoid sales tax rises. EU Brexit distractions only delay the eventual choice between popular support and a new financial storm.

Fed waves white flag on normalization

20 Mar 2019

The U.S. central bank held interest rates steady, cut its forecast for hikes and will stop shrinking its balance sheet in September. There are signs of slowing global and domestic growth, but the package looks more like a market wish list than the result of data-driven analysis.

Mario Draghi is boxed into being generous to banks

5 Mar 2019

The European Central Bank boss is expected to announce more cheap loans in the coming months. New regulations may otherwise cause a credit crunch just as the euro zone economy is slowing. Monetary policymakers will have little choice but to paper over a two-tier banking system.

Zimbabwe offers a way to test blockchain’s worth

5 Mar 2019

Even after a 60 pct devaluation, Harare’s monetary credibility is irreparably broken. That should make it an ideal test case for distributed ledgers replacing ropey central banks. Yet citizens’ justifiable distrust of the state doesn’t mean ceding monetary control is an easy fix.

Fed settles for big balance-sheet future

27 Feb 2019

Chairman Jay Powell told Congress that the U.S. central bank would stop running down its assets this year. That means holding at least $3.5 trillion, four times the pre-crisis figure. That’s not the “normalization” many were looking for – but there are reasons for it.

U.S. stocks daze Trump into folding on China

25 Feb 2019

The president says he will delay a tariff hike on $200 bln of Chinese goods. Tweets imply he will ease up on Huawei too. Wall Street wobbles have pushed the White House toward a quick-and-dirty deal which empowers Beijing hardliners, and benefits neither side in the long run.

Zimbabwe’s devaluation is a missed opportunity

22 Feb 2019

Harare has conceded that its electronic “zollars” are worth 60 percent less than it had claimed. Yet black market valuations imply the currency is still overvalued. The moves could rile citizens without spurring the investment Zimbabwe sorely needs to fix its battered economy.

As earnings go, so goes the world economy

20 Feb 2019

For the first time since 2013, no country in the MSCI World Index is seeing more earnings upgrades than downgrades, Morgan Stanley says. The phenomenon usually coincides with U.S. or euro zone recessions. That augurs poorly for an incoming raft of economic data.

Jerome Powell’s boon is Mario Draghi’s bane

11 Feb 2019

Inflation in the U.S. and the euro zone is easing and looks set to subside further. That will help the Federal Reserve boss justify a pause in rate hikes, but is a headache for his European Central Bank peer who has yet to tighten monetary policy and has less room to manoeuvre.

India’s big budget betrays Modi’s election angst

1 Feb 2019

A decision to ease efforts to reduce the fiscal deficit will dent the government’s prudent reputation. Yet support for farmers, a new pension scheme and a higher effective tax exemption, even as revenues fall short, will give the prime minister a better shot at a second term.