Monetary Policy

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.

U.S. rate hike risks global fallout

21 Mar 2018

Gulf states, Hong Kong and others that peg their currency to the dollar worry that copying Fed moves will dent growth. But with five more hikes expected by the end of 2019, not doing so risks the ire of financial markets. It's a tricky dance that even China may be dragged into.

Review: The flimsy finances behind China’s miracle

9 Mar 2018

The People’s Republic has long defied the economic doom-mongers. In “China’s Great Wall of Debt”, Dinny McMahon exposes the fragility and contradictions of the country’s growth model. It’s a detailed and original reality check on the latest bout of China hype.

Viewsroom: Trump slaps tariff fear on markets

8 Mar 2018

Imposing levies on steel and aluminum has lost the president his economic adviser, ex-Goldman No. 2 Gary Cohn. That has shocked investors out of complacency. Also: Italy’s elections leave fringe parties in charge. And big deals may be back on the agenda for the mining industry.

Mario Draghi faces tricky exit from bond buying

8 Mar 2018

The European Central Bank president has started laying the groundwork to end three years of asset purchases. But there’s a growing danger that his careful preparations will be thrown off course by U.S. protectionism, euro zone politics, or unwelcome market moves.

Trump’s next Fed pick in limbo for wrong reason

20 Feb 2018

Economist Marvin Goodfriend’s accession to the board of governors hangs in the balance after senators voiced concern about his past proposals to depreciate cash. Concern about his hawkish inflation views is fair. But penalizing him for creative thinking on a tricky issue is not.

Bank of Japan’s Kuroda bags a tricky second term

16 Feb 2018

Continuity in Japan contrasts with a changing of the guard at U.S. and European central banks. Haruhiko Kuroda is unlikely to wind up asset-buying or ramp it up a lot. But he must handle the backdraft from policy changes elsewhere and has limited scope to fight the next crisis.

Hints of inflation pose litmus test for Powell Fed

14 Feb 2018

U.S. consumer prices accelerated in January as the cost of food, housing, fuel and medical care rose. That’s not all bad after a decade of sub-target inflation. The fear is that new Fed boss Jerome Powell will step up the pace of rate hikes. The risk of policy error is rising.

Japan’s economy is in Goldilocks mode

14 Feb 2018

The country is enjoying its longest growth streak since the 1980s. Unlike in the United States, wages and inflation remain subdued, so monetary policy can stay very easy. That “not-too-hot, not-too-cold” mix is good news for investors, even if it stores up problems for later.