Monetary Policy

EU second-tier banks could get yield curve leg-up

15 Feb 2017

Credit Agricole and ABN Amro posted forecast-busting fourth-quarter earnings on loan growth. Expectations for higher rates could eventually boost pricing in their mainly fixed-rate mortgage books, too. But political uncertainty in the Netherlands and France merits buyer caution.

Yellen throws sand in Trump’s deregulatory gears

14 Feb 2017

In her first Senate testimony since the president took over, the Fed boss defended post-crisis rules and said banks are robust and lending strongly, contradicting Trump adviser Gary Cohn. Fed board seats are open, but rolling back regulation may need to wait for the next chair.

Euro risks replacing sterling in FX doghouse

10 Feb 2017

The battered pound has won a reprieve as post-Brexit growth is proving more resilient than investors had anticipated. By contrast, the euro's star is waning before France's unpredictable elections. Options prices signal that the single currency could become traders' next victim.

Investment drought is about more than spreadsheets

9 Feb 2017

Companies’ reluctance to invest is one of the main conundrums facing policymakers. A new Bank of England survey suggests old habits and crisis memories play a bigger role than any shortage of finance. It’s another reminder that loose monetary policy can only achieve so much.

Indian bank is right to think big in microfinance

7 Feb 2017

A mooted $1.7 bln takeover of Bharat Financial Inclusion would help IndusInd Bank sustain rapid growth and boost profitability. It would also help secure the bank's already high valuation. However, the buyer will also inherit the political risks of lending to the very poor.

India favours poor with damage-control budget

1 Feb 2017

Finance Minister Arun Jaitley is relaxing a bit on deficit reduction, while taxing the rich more to fund big outlays for the rural poor. There are few benefits for corporate India. But the budget will help to limit the political fallout from India's big currency experiment.

Merkel ignores dark side of job boom at her peril

26 Jan 2017

Rises in employment and real incomes mask the problem of growing income inequality in Germany. Chancellor Angela Merkel’s ability to fend off an election challenge from the rebooted centre-left Social Democrats may hinge on how she proposes to stop the poor becoming poorer.

Britain’s Brexit cliff: how big is the drop?

16 Jan 2017

As Theresa May prepares to reveal details of the UK’s post-EU objectives, the risk of a clean break in 2019 has risen. Such an outcome is suboptimal. But Britain’s negotiating position is far from hopeless, and the scale of the pain from “hard Brexit” can be overstated.

Hadas: The new autocratic economics is still fuzzy

12 Jan 2017

Muscular leaders have diverging concerns. Oil-dependent Putin does little to promote Russian growth. China’s Xi puts expansion above financial stability, while Turkey’s Erdogan risks the economy for political strength. The common factor is state control, greased with corruption.

Czech currency cap will go way of the Swiss

11 Jan 2017

A peg tethering the crown to the euro has served its purpose by fending off deflation and nurturing growth. It's now becoming a magnet for speculative flows. As Switzerland showed policymakers two years ago, it's best to ditch doomed currency caps sooner than later.

Euro zone revival carries sting in tail

4 Jan 2017

After years in the doldrums, increased business activity and slightly rising prices are good news for the single currency area. Besides, inflation is still a long way below the European Central Bank target. But a sustained pickup would expose the euro zone's two-speed recovery.

Hadas: Four resolutions for a more humane economy

3 Jan 2017

Brexit and Donald Trump’s election are part of a rebellion against the social and economic establishment. Changes are needed to prevent a dangerous disintegration. Here are some suggestions: forget GDP, fight alienation, support communities and promote local decision-making.

Rate hikes will help U.S. pensions, but not enough

27 Dec 2016

If bond yields head higher, that will cut cash-strapped public retirement funds' sky-high liabilities. Weak returns and weaker-kneed politicians mean relief could be fleeting, however, especially if the economy falters. Illinois and Dallas are canaries in a $1 trln coal mine.

Bank of Korea stuck between Park and a hard place

15 Dec 2016

The day after the Fed raised rates, the South Korean central bank kept them unchanged for a sixth straight month. The won can take a hit, but the country's sagging economy could use some stimulating. That's especially true as a president-less government creates added uncertainty.

New president may force hawkishness on 2017 Fed

14 Dec 2016

The central bank nudged interest rates up again after a year's pause. Janet Yellen and colleagues previously sounded cautious but that was before the Trump bump. If bond yields, inflation and stock prices continue to rise, the Fed will be under pressure to make quicker increases.

Even if Yellen remains, Trump can reshape Fed

13 Dec 2016

The governors of the U.S. central bank are gathering for the last markets meeting of this year. The chair plans to stay until 2018. But with two vacancies out of seven and the potential for more to quit, the next president has a chance to tip the political balance of the group.

Draghi’s market first-aid kit ready for 2017

8 Dec 2016

The ECB boss is extending the central bank’s asset buying until the end of next year but will unexpectedly reduce purchases from April. It may sound muddled. In fact, these and other changes give Draghi more scope to support markets throughout a politically fraught year.

“Irrational exuberance” gets a new lease on life

5 Dec 2016

After Alan Greenspan coined the phrase exactly 20 years ago, it took three years before the tech bubble burst. Markets are spirited again, by low rates and Trump. As the Fed acts and the president-elect pushes his policies, asset values may face a quicker reckoning this time.

Markets’ 1980s revival looks a flawed throwback

25 Nov 2016

The prospect of tax cuts and higher interest rates in America invite comparison with the era of Ronald Reagan and Paul Volcker. U.S. bond yields and the dollar have started soaring, as they did then. But the threat of protectionism makes history an unreliable guide to the future.

Trump may make Mario Draghi great again

10 Nov 2016

European bonds are tracking the rise in U.S. yields sparked by President-elect Donald Trump's spending plans. This helpfully expands the number of bonds that the ECB boss can buy. U.S. protectionism would also hurt the euro zone economy and push Draghi back into the limelight.