Monetary Policy

Fed’s stability checkup downplays wobbly features

28 Nov 2018

Chairman Jerome Powell says the financial system is in good health, echoing a report from the U.S. central bank. The jobless rate is low while inflation remains in check. But risks like trade fights and corporate debt only get brief mentions. Watchdogs may regret that posture.

China’s too-big-to-fail rules go the right way

28 Nov 2018

Regulators have published new guidelines for supervising key banks, insurers and brokers. Of course, Beijing owns most big banks and failures are rare. But indicating who should be saved means others may be allowed to sink: that's a step towards liberalising a $40 trln industry.

Italian budget climbdown would be just a start

26 Nov 2018

The anti-austerity government may trim its 2019 budget deficit target to defuse a clash with the European Commission. That would ease financial market tensions which risked undermining any benefits of extra spending. The stimulus is still being spent in the wrong places, though.

Italian savers send Rome a warning on debt

21 Nov 2018

Private investors are shunning an issue of sovereign bonds reserved for them. Lacklustre interest in the “BTP Italia” undermines hopes that households will replace fleeing foreign buyers. It’s also a first sign of domestic discontent over Italy’s budget clash with the EU.

Hadas: Fear of fiscal deficits is overdone

14 Nov 2018

Mainstream economists agree that governments can safely spend more than they take in, but worry about big funding gaps. Some dissidents make a good case for going deeper in the red. They could be bolder. Most domestic borrowing can be replaced with straight money-printing.

Hadas: Central bankers stuck between two myths

8 Nov 2018

Monetary authorities dream of a neutral technocracy though their jobs are inherently political. Politicians from the U.S. to India fantasise about exerting more monetary control, but wild policies quickly turn toxic. The uncomfortable status quo may be the least bad arrangement.

UK exploits fiscal good luck while Brexit allows

29 Oct 2018

Finance minister Philip Hammond plans to control the deficit while spending more on health, defence and schools without big tax hikes. Economic serendipity allows him to. A messy EU exit would end a run of good fortune, since he has used up much of the windfall that came his way.

Struggling Filipino deals expose market flaws

29 Oct 2018

Local champion San Miguel was forced to shrink a stock sale while Melco met resistance to its casino takeover plan. Both episodes provide timely reminders about structural shortcomings for an exchange that trades less daily than smaller Vietnam. To grow will require some fixes.

Italy tries risky EU gamble on budget

19 Oct 2018

The radical government wants to boost spending despite Brussels’ opposition. Lengthy procedures mean the spat will drag on until European Parliament elections in May. With radical parties gaining ground, the new Commission could be more lenient. But markets won’t wait that long.

Zimbabwe’s soaring stocks are a disaster signal

12 Oct 2018

Harare’s bourse leapt 66 percent this week even as global equities sagged. That reflects crumbling faith in cash and banks rather than confidence in the economy. The southern African country is in such a sorry state that shares are a rare source of sanctuary.

Markets are finally getting back to basics

11 Oct 2018

A slump in stocks slowed on Thursday, partly thanks to tame U.S. inflation data. American equity valuations are high, trade tensions and interest rates are rising, and earnings season is under way. Six months of steady tech-led gains may be giving way to the facts on the ground.

South Africa offers markets a too-friendly face

9 Oct 2018

New finance chief Tito Mboweni is one of the country’s most respected black economists, and his decade at the helm of the reserve bank adds credibility to Cyril Ramaphosa’s government. Ties to Goldman Sachs, though, could make him a target for political criticism at home.

Hadas: Nobel rewards pointless economic modelling

8 Oct 2018

Paul Romer won half the 2018 prize for recognising that education and governments help growth. William Nordhaus won the other half for condemning man-made climate change. Obvious? Maybe, but their work has complex equations. Unfortunately, these obscure more than they clarify.

Beijing’s $175 bln boost raises stimulus conundrum

8 Oct 2018

The central bank has pumped yet more cash into the system. Despite the debt hangover from its last spree, China does need more investment in green technology, healthcare and education. Economically, it can also afford to spend wisely. Haste, though, will make more waste.

Indonesia could grease economic wheels with oil

27 Sep 2018

Rising Brent prices and a falling rupiah have left the country choking on fuel costs. It was once an OPEC member and net exporter, but now imports almost $1 bln of crude monthly. Even with a fresh interest rate hike, Jakarta can take fiscal steps to ease its energy pain.

Hawkish Fed competes with trade as investor risk

26 Sep 2018

The U.S. central bank raised rates for the third time this year and will probably do so again in December. Meanwhile, its balance sheet is shrinking as Uncle Sam issues more debt. U.S. duties on $200 bln in Chinese goods also just hit. The confluence could upset markets.

Chancellor: The carry trade that followed Lehman

14 Sep 2018

The subprime crisis was born from yield-chasing in the Greenspan easy-money era. Even lower interest rates since the Lehman bust revived the global carry trade. Another maelstrom will be hard to avoid.

Turkey’s outbreak of common sense has limits

13 Sep 2018

The central bank has hiked rates more than markets expected, a welcome sign of independence after attacks by President Erdogan. The move may avoid a currency crisis, but Ankara’s political and economic vulnerabilities endure. And tensions between bank and state may get worse.

Guest view: Real rates matter more than inversion

13 Sep 2018

An inverted U.S. yield curve, with short-term interest rates higher than long-term ones, is seen as a recession warning. Myron Scholes and Ash Alankar of Janus Henderson Investments argue that monetary policymakers should worry more about the excess of yields over inflation.

Chancellor: The legacy of ultralow interest rates

10 Sep 2018

This first in a series of "Ten Years After" essays argues the bold monetary experiment that followed Lehman’s demise unleashed speculative manias, carry trades, populism born of inequality, capital misallocation and a China bubble that pose grave threats to the financial system.