Monetary Policy

India central bank doubles down on inflation fight

1 Aug 2018

The Reserve Bank of India raised rates by a quarter of a percentage point even though manufacturing activity slowed in July. The hike may hamper economic growth but removes doubts about policymakers’ commitment to a relatively new inflation mandate. The trade-off is worthwhile.

Bank of Japan tries cheap way of imposing will

31 Jul 2018

Governor Haruhiko Kuroda has pledged to keep rates very low for an extended period to calm investors’ concern that monetary policy may become less loose. The no-cost tactic to keep bond yields in check is born of necessity given how many assets the central bank is already buying.

Turkey misses easy chance to win credibility

24 Jul 2018

The lira slumped after the central bank left interest rates unchanged. With inflation at 14-year highs, there was every reason to tighten policy. Inaction will only reinforce investors’ concern that President Tayyip Erdogan’s distaste for higher rates is exerting undue influence.

Bank of Japan’s trial balloon shot down on runway

23 Jul 2018

Bond yields and the yen rose after Reuters reported the central bank was debating whether to scale back monetary stimulus. The move would be good for bank investors. But the scale of the market reaction and economic reality will make it hard for Governor Haruhiko Kuroda to act.

Powell could help stiffen Congress’ spine on trade

17 Jul 2018

The Fed chief told lawmakers U.S. tariffs could threaten wage growth, but said it was unpredictable. Trade policy isn’t the Fed’s remit. Politicians are, though, worried at the early effects – yet they don’t want to anger Trump. A stronger steer from Powell might tip the balance.

Boring Chinese GDP data just got interesting again

16 Jul 2018

Economic growth clocked in at 6.7 pct in the second quarter from a year ago, down a tick from earlier this year. The figure has been uncannily steady, making it easy to shrug off. As a trade war and deleveraging bite harder, though, overseas investors should pay closer attention.

People’s Fed will provide armor in economic dip

21 Jun 2018

Chairman Jay Powell says he’ll speak in plain English about what the U.S. central bank does. He also admits the Fed doesn’t have all the answers. Demystifying it should strengthen its credibility. That will be handy when the economy turns and politicians are pointing fingers.

Argentina’s road to normality hits more zigzags

15 Jun 2018

The replacement of the central bank chief should help stabilize the peso, along with IMF assistance, despite Thursday’s 6 percent drop. It’s all part of President Macri’s long haul to turn his country’s economic pathology into more mainstream travails. It won’t be smooth going.

ECB staggered retreat from QE makes sense

14 Jun 2018

Europe’s central bank said it would stop adding to its bond portfolio, but hinted rates would stay low. The move averts fears quantitative easing will help Italy’s spendthrift government. But trade wars and a weak euro zone mean it has little choice but to keep its options open.

China starts trading debt for growth

14 Jun 2018

Shadow bank lending slowed sharply in May, and investment growth slipped to just 6.1 pct. For now, Beijing’s target of increasing GDP by 6.5 pct annually is safe. But officials will be thinking about creative ways to keep credit flowing, even as they discourage riskier behaviour.

Emerging markets can mostly dodge Fed bullet

13 Jun 2018

U.S. central-bank tightening has a history of causing global turmoil, as in the 1980s Latin debt crisis. But developing countries can largely handle a rate hike, with flush reserves and reduced dollar-based debt. Troubles in Argentina and Turkey are essentially home-brewed.

Hadas: This should be an anti-dollar moment

13 Jun 2018

Discontent with the world’s dominant currency is not new, but the Trump effect is something new. A trade circuit free from the U.S. president’s idiosyncratic America-first policies is urgently needed. The euro and renminbi can provide a base, but the politics are unpromising.

China will tightly control even looser capital

13 Jun 2018

Money is moving more freely in and out of the country as fears that sparked a 2015 clampdown wane. Greater sums can be invested abroad while daily limits from Hong Kong to mainland markets quadrupled to $8 bln. Official signals suggest, however, that the easing will be tortuous.

India’s central bank finds comfort in the crowd

6 Jun 2018

A 25 basis point hike in the main rate comes as the rupee is one of the worst performing regional currencies this year. By acting now, the Reserve Bank of India ensures it doesn’t look like a laggard. But higher rates and oil prices mean the recent growth spurt may soon wane.

Mario Draghi may help more in Rome than Frankfurt

31 May 2018

Turmoil in his native Italy threatens the European Central Bank chief’s biggest triumph: saving the single currency. A eurosceptic government would weaken his promise to do “whatever it takes”. He might have more success challenging opponents of the euro as a domestic politician.

How the EU can help save Italy from itself

31 May 2018

A new radical government will cast doubt over euro membership and inflame migration tensions. Other EU countries could help ease voter discontent by tweaking the bloc’s fiscal rules, and taking more migrants. That won’t be easy, but it beats Italy leaving the single currency.

Only Italy can save itself from self-inflicted woe

29 May 2018

Investors are spooked by the prospect of a eurosceptic government pushing up debt, prompting an exit from the single currency. Contrary to 2011, Italy is the cause of the crisis, rather than a victim. A change of direction depends on voters, not the European Central Bank.

Turkey’s FX rot demands radical measures

23 May 2018

A massive one-off rate rise is the least it will take to halt the lira’s accelerating slide to new record lows against the dollar. Even then, investors might still fear President Tayyip Erdogan’s monetary policy meddling. Capital controls would then grow more likely.

Mark Carney may flummox markets again

10 May 2018

The Bank of England chief’s latest comments made investors doubt he will tighten monetary policy this year. Such scepticism is overdone. The economy doesn’t have to grow very fast to generate inflation and the jobless rate is very low. Rate expectations could shift once more.

Argentine central bank’s grip holds – for now

7 May 2018

Sharp rate hikes to 40 pct last week halted a slide in the peso. A tough stance against inflation and Mauricio Macri’s relative fiscal discipline are needed for long-term economic health. But tightening the screws puts the president’s domestic popularity and policies at risk.