Monetary Policy

ECB’s mandate is best left murky

30 Mar 2017

Two members of the central bank's executive board have mused on its accountability, after a report criticised the ECB for overreach. It indeed pulled some pretty off-piste moves during the euro zone crisis. Yet clarity could constrain its ability to fight future crises.

Markets can ease Bank of England inflation dilemma

21 Mar 2017

Prices rose 2.3 pct in February, surpassing the central bank’s target for the first time since 2013. Market rates and sterling rose. This tightening in monetary conditions might allow Governor Mark Carney to defer a hike in official rates until the economic outlook is clearer.

Brexit could weaken Britain’s puny productivity

21 Mar 2017

As in most developed countries, UK companies are struggling to produce more with the same workers. Exporters and foreign-owned firms are the notable exceptions. If leaving the European Union squeezes trade and shrinks foreign investment, living standards will suffer.

Fed hike puts sand in economy’s consumer engine

15 Mar 2017

The U.S. central bank raised interest rates for the second time in three months. Healthy jobs growth and strong business confidence indicate an economy in good shape. Yet household debt is reaching record levels and higher borrowing costs will start to pinch people’s wallets.

Draghi is tugged towards tricky end of ECB easing

9 Mar 2017

The European Central Bank boss sees less need for more stimulus. It’s hard to say otherwise when inflation is on target and likely to stay near there. Yet Europe’s fragile economy makes ending asset purchases a treacherous task that he will want to postpone as long as possible.

Markets’ latest distortion: riskless company debt

7 Mar 2017

Some 200 billion euros of corporate bonds are trading below interbank swap rates – usually seen as a floor for credit risk. That renders one measure of companies’ creditworthiness redundant. This distortion comes courtesy of central bank meddling and German parsimony.

China has leeway to tackle local debt mountain

7 Mar 2017

Authorities say cutting the $2.2 trln local government debt pile is a 2017 priority. Past attempts failed. An improving economy gives Beijing room to address the issue, in part by boosting local tax power. Possible higher interest rates and lower land prices argue for haste.

U.S. consumers offer better prop for stock market

15 Feb 2017

American retail sales jumped in January while consumer prices rose at their fastest rate in four years, reflecting solid growth. Optimism about Donald Trump’s economic plans has lifted markets. Sound economic fundamentals are more reliable than the dysfunctional White House.

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.