Monetary Policy

Central banks have no choice but to keep the faith

20 Jul 2017

ECB chief Mario Draghi and Bank of Japan boss Haruhiko Kuroda have spent trillions of euros and yen without generating much inflation. Nor is it clear when a pick-up in growth will feed through into prices. Yet they are obliged to insist their policies will work eventually.

Canada treads a fine line in following the Fed

12 Jul 2017

The central bank raised its key interest rate for the first time in nearly seven years, saying growth looked healthy. Inflation remains below target, though, and a housing bubble threatens to deflate. It's hard for Canada not to match tighter U.S. policy, but it carries risks.

Only in Trumpland is Gary Cohn suitable Fed chair

12 Jul 2017

The former Goldmanite and White House adviser is tipped as top contender to replace Janet Yellen. Though not an economist, his years in finance put him ahead of other cabinet picks lacking relevant résumés. But a Wall Street trader's temperament is no match for the staid job.

Bank of England puts price on bond fund stupidity

12 Jul 2017

Regulators worry that the growth of open-ended bond funds could cause fire sales. A central bank paper estimates that could add nearly half a percentage point to companies’ funding costs. Pointy-headed analysis should reinforce the case for more sensible investment models.

Cool credit markets could be own undoing

10 Jul 2017

Corporate bonds shrugged off the recent “taper tantrum” that hit government debt and equities. Investors may be betting that central banks will only slowly tighten policy, supporting demand for riskier assets. Yet unruffled markets may only hasten policymakers’ rush for the exit.

Bank of Japan can hold out as Western yields rise

7 Jul 2017

The central bank underlined its determination to keep 10-year yields close to zero by offering to buy unlimited bonds. The BOJ has the tools, market dominance and motivation to hold firm. Tighter policy in the West should help Japan by weakening the yen and importing inflation.

Blueprint for UK finance free trade has many holes

6 Jul 2017

Brexit need not mean an end to open markets in financial services, chief watchdog Andrew Bailey says. His pragmatic vision would, however, require Britain to accept future EU rules and legal oversight. Even if UK politicians agree, European ones have reasons to dissent.

Exchange Podcast: Bill Emmott

5 Jul 2017

The system of political and economic openness built after World War Two is under threat, Bill Emmott argues in his new book "The Fate of the West." He joins us to discuss globalization, populism and why there's still cause for optimism about the future of liberal democracies.

Review: What really creates the value of money

30 Jun 2017

Christine Desan’s “Making Money” is not only a fine monetary history of England. The 2014 book is relevant today. It shows cash and governments go together, the gold standard was a misnomer and central banking is political. And we should stop outsourcing money-creation to banks.

Draghi’s taper tizzy is sign of dangers to come

29 Jun 2017

Comments by ECB chief Mario Draghi drove up bond yields and the euro, despite later protestations that markets had misread him. The ado owes more to investor complacency than fuzzy talk. It highlights traders’ twitchiness and the challenges in withdrawing ultra-loose policy.

Hadas: Time for a big rethink on interest rates

28 Jun 2017

Central banks are told to worry first about prices. The long-term global trend of low inflation makes that a distraction. The right focus now is on weaning investors off the false highs of easy credit and rising asset prices. Part of the withdrawal is making money more expensive.

Draghi’s hints have more clout than Yellen’s deeds

28 Jun 2017

ECB chief Mario Draghi had more market impact by alluding to higher rates than Fed Chair Janet Yellen did by hiking them two weeks ago. That fits a recent pattern: central bankers who have yet to tighten policy are more apt to upset expectations – and that’s what moves prices.

Bank of England tries surrogate rate hike

27 Jun 2017

The central bank’s bubble-pricking committee is raising the minimum capital ratio for UK banks by up to a full percentage point. The surgical tool may help to rein in frothy consumer lending. But the blunt instrument of higher policy rates cannot be delayed forever.

Hong Kong needs actual fintech, not just IPOs

22 Jun 2017

The city is trying to lure hot financial technology listings. But it's a slow mover when it comes to mobile payments and e-commerce. In stark contrast with mainland China, much of Hong Kong still shops on foot and pays with paper. That reflects a broader struggle with innovation.

Fed raises balance-sheet nerds’ heart rates

14 Jun 2017

The U.S. central bank hiked rates as expected. It will also soon begin shrinking its $4.5 trln stock of bonds. The process will be gradual, taking a few years to trim the holdings below $3 trln. But when one of the biggest buyers of bonds throttles back, markets may face a test.

Political mess puts Bank of England on the spot

14 Jun 2017

Governor Mark Carney is not raising rates in response to a spike in inflation since it’s probably temporary and wages remain subdued. However, Britain’s fragile government will probably loosen fiscal policy. Though bond yields remain low, investors are showing signs of nerves.

India’s RBI boldly pulls trigger on bad loan mess

14 Jun 2017

The central bank will order lenders to tip 12 companies into bankruptcy. They account for 25 percent of the nation's total bad loans. That will be a big test for a new insolvency regime. Still, it shows the RBI's determination to clean up the shambles and defend its credibility.

Sterling post-election blues will be slow to lift

9 Jun 2017

A hung parliament has hit the currency hardest of all UK assets. The saving grace is that a brutal exit from the European Union and a second Scottish independence referendum may now be a little less likely. But neither is a good enough reason to stock up on pounds anytime soon.

Europe is a fertile petri dish for GDP-linked debt

6 Jun 2017

Linking national debt payments to economic performance could help countries cope with downturns. There are many obstacles. Bad governments might fiddle statistics; good ones may be reluctant to pay a premium for flexibility. Even so, the euro zone is a good place to test the idea.

Review: A premature requiem for the liberal order

26 May 2017

Globalisation is in retreat and democracy under attack. Two new books foresee a gloomy future for the Western-led economic and political system. Yet just as some were too quick to proclaim its triumph in 1989, the obituaries sparked by Donald Trump’s election may prove too hasty.