Monetary Policy

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.

Nigeria’s FX reserve fetish is bad for growth

30 Apr 2018

President Muhammadu Buhari is vaunting a rapid rise in foreign exchange reserves. A decent war chest is worth having in case the naira needs defending. But accumulating a vast pile of dollars will deprive the economy of the hard currency it needs to keep growing and create jobs.

Mark Carney can delay UK rate rise with impunity

27 Apr 2018

A sharp slowdown in UK growth is enough reason for the Bank of England boss to defer monetary tightening. He has further grounds to hesitate since euro zone activity has slackened, with French growth more than halving in the first quarter. Discretion is the better part of valour.

Jakarta is in a bind over interest rates

27 Apr 2018

Indonesian stocks are sliding alongside the rupiah, as higher U.S. yields prompt investors to sell out. But growth is tepid in Southeast Asia’s largest economy and an election looms. So the central bank is unlikely to follow through on talk of a hike, unless conditions worsen.

Mario Draghi struggles to ditch post-crisis policy

26 Apr 2018

Euro-zone growth is slowing before the European Central Bank boss can end asset purchases or join the Fed’s Jerome Powell in raising rates. One-off factors may be to blame now but a downturn is inevitable. Unusual policy will be the norm rather than the aberration in Europe.

Hadas: Debt overload is an easy problem to solve

25 Apr 2018

Three financial revolutions would be enough to bring down debt. Tax corporate debts, don’t subsidise them. Let the public share unearned gains on land. And replace government debt with newly printed money. These ideas may sound too radical – until the next mega-crisis arrives.

Swiss central bank gets FX wish three years late

20 Apr 2018

The franc has weakened to 1.20 against the euro for the first time since the Swiss National Bank ditched its cap on the currency in January 2015. Several factors could explain why. Policymakers are unlikely to care much about the reasons given the moves may help revive inflation.

Hong Kong’s dollar peg looks durable

13 Apr 2018

The monetary authority stepped in to prop up the local currency, the first such intervention under a system that dates to 2005. Long term, the territory will probably ditch its tie to the U.S. dollar and track the yuan instead. But the peg faces no serious threat for now.

Trillion-dollar U.S. deficits are funding headwind

10 Apr 2018

Recent tax cuts will push the annual federal budget shortfall into 13 figures and debt to nearly 100 pct of GDP by 2028, Congress’s number-crunchers reckon. The forecast, on the eve of a big auction of Treasury securities, gives investors one more reason to demand higher yields.

Quest for central bank transparency has limits

5 Apr 2018

UK rate-setters are debating the merits of more openness, by for example issuing official interest rate forecasts, the Financial Times reports. More information may not mean more insight. After all, good policymakers change their minds when the economic environment does.

Wells Fargo is wrong objection to NY Fed candidate

27 Mar 2018

John Williams, who heads the U.S. central bank’s San Francisco operation, may be close to the top Liberty Street job. Wells sinned on his watch, as Senator Elizabeth Warren has noted, but other watchdogs deserve blame. For anyone looking, there are better arguments against him.

Stars align for Mark Carney to raise rates again

22 Mar 2018

UK inflation is high enough for the Bank of England boss to further tighten policy in a couple of months but not so high as to hurt consumer demand, especially as wages are picking up. And Brexit poses less of an immediate danger. Politics and economics are both on Carney’s side.

New Fed chief leaves more questions than answers

21 Mar 2018

Jay Powell sold a rate hike and hawkish economic outlook with dovish language at his first policy meeting. The central bank is divided over how low unemployment can go and whether tax cuts will spark inflation. The chair’s confident showing may buy time to resolve the tensions.