Monetary Policy

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.

Italy recession is oddly helpful for EU fiscal row

31 Jan 2019

The economy contracted for the second quarter in a row at the end of 2018. Rome is increasingly likely to miss a budget deficit goal of 2 pct of GDP but will get away with it. Imposing austerity during a broad-based euro zone slowdown makes no economic or political sense.

Fed patiently tells market it will be patient

30 Jan 2019

Stocks rose on the U.S. central bank’s comments reiterating that interest-rate moves depend on economic conditions. Ditto for the pace of shrinking its balance sheet. That’s nothing new, yet overly sensitive investors needed the reminder. For now the Fed is holding their hands.

Mario Draghi will deploy old tools in new slowdown

24 Jan 2019

The European Central Bank boss said growth may slow but offered no fixes. Resuming bond buying would be controversial, and a rate cut could hurt the financial sector. Renewing cheap loans to banks is his likeliest choice. The only question is how generous his terms will be.

Guidance is a two-way street with Fed and markets

10 Jan 2019

Jerome Powell says the U.S. central bank will be patient in weighing new rate moves. Previous hawkish comments unsettled investors, helping tank stocks last month. The two are learning to read each other, but a data-dependent message may get tricky if the economy starts to turn.

Looser China drops hints of trade pain ahead

7 Jan 2019

The central bank says it will slash the amount lenders need to hold in reserve, freeing up a net $117 bln. It’s not full-blown stimulus. Still, an easing move on the eve of talks signals Donald Trump may be right: China’s economy, and its negotiating position, is weakening.

Next ECB boss will matter less than his sidekick

3 Jan 2019

Most of those vying to replace Mario Draghi at the European Central Bank lack his creativity. Others will have more scope to sway debates. Ireland’s freethinking Philip Lane is favourite to be chief economist. He would have outsized influence, especially in the next downturn.

EU investment banks face the regulatory microscope

28 Dec 2018

With the region’s bad-debt crisis on the wane, supervisors will shift their focus to probing lenders’ risk models and 132 billion euros of hard-to-value assets. For banks which had previously relied on their own guesstimates, that could mean higher capital charges.

Japan is stealth threat to 2019 market stability

24 Dec 2018

Governor Haruhiko Kuroda’s tiny tweaks to ultra-loose policy will agitate global asset prices more than the actions of his U.S. or euro zone peers. Higher domestic yields are set to lure Japanese money back from U.S. credit or European debt markets and the yen will be buoyant.

Fed hike leaves Powell exposed in multiple ways

19 Dec 2018

The U.S. central bank raised rates despite criticism from President Trump. Slowing growth and bearish markets will only complicate its task going forward. The chairman will give more public talks in 2019 just as it gets harder to offer guidance. It could be a bumpy ride.

Italy’s budget truce may yet herald 2019 hangover

19 Dec 2018

Rome’s anti-austerity executive has ended a damaging EU row by backing down over its deficit, cheering domestic asset prices. But its restraint looks largely cosmetic. Investors may soon fret about the risk of a recession and how to refinance public debt without much ECB support.

India’s new central bank boss starts on back foot

12 Dec 2018

Ex-finance ministry official Shaktikanta Das was chosen to run the RBI, a day after Urjit Patel quit. Top marks for a fast pick. There’s little to suggest, however, that a bureaucrat who backed the prime minister’s fateful demonetisation plan will resist pressure from New Delhi.

Powell and Carney at least know their own limits

29 Nov 2018

The Fed chair irks U.S. President Donald Trump when rates rise, while the Bank of England boss took all-around flak for unveiling worst-case Brexit scenarios. Central bankers are imperfect but, unlike some critics, they rarely claim infallibility and usually show their workings.