Monetary Policy

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.

Britain better off if Carney stays

31 Oct 2016

The governor’s tenure has become a test of the Bank of England’s status. If he left in 2018 the decision would spook foreign investors and embolden the bank’s domestic critics. Extending his term would signal that the British government still values independent monetary policy.

ECB taper whimper is the most low growth permits

5 Oct 2016

Reports that the European Central Bank may reduce asset purchases caused a blip up in bond yields. But it's a far cry from the 2013 U.S. tantrum, and rightly so. Weak growth and insufficient public investment will force monetary policy to stay loose despite diminishing returns.

Hadas: Central banks play with monetary absurdity

23 Sep 2016

Monetary authorities have taken recourse in increasingly empty promises. The Bank of Japan's Haruhiko Kuroda has taken this verbal drama to a new and ultimately dangerous level. Central banks could rely on deeds, not words, if their tools and targets were more realistic.

Fed “forward guidance” blows too much smoke

21 Sep 2016

The U.S. central bank again declined to raise rates, leaving what hedgie Dan Loeb called the crack cocaine of loose monetary policy in place. The Fed counts talking to the market as one of its tools. But its story has changed so much that it might do better being less chatty.

BOJ buys time and friends with yield-based reboot

21 Sep 2016

The Bank of Japan has ditched its money-printing goals, pledging instead to keep 10-year interest rates at zero until inflation exceeds 2 pct. The central bank’s latest overhaul means it is less likely to run short of debt to buy, and eases the financial sector’s pain.

Government bonds signal confusion, not cheer

19 Sep 2016

Yields on long-term sovereign debt have perked up across the developed world. Normally that's a sign of optimism. Yet borrowing costs remain ultra-low. The upward drift most likely reflects uncertainty about central bank policy and worries about the effects of negative rates.

Scarce bonds and bank pain limit BOJ’s next move

19 Sep 2016

The Bank of Japan faces a conundrum in its battle to revive inflation. It can’t keep buying $800 bln of bonds a year for much longer, but negative rates are deeply unpopular. This week’s big policy review might require the BOJ to make other concessions to the financial industry.

Global bond rout gives Draghi a reprieve

14 Sep 2016

The rise in yields as prices fall makes more German debt eligible for ECB purchases, under its own arcane rules. President Mario Draghi is still, though, running out of bonds to buy. Canny market timing is a poor substitute for a real solution: Germany could simply borrow more.

Fed governor’s rate view helps her Treasury pitch

13 Sep 2016

Lael Brainard struck a dovish note on interest rates ahead of the central bank’s next meeting. She’s also a leading candidate to be Treasury secretary in a Clinton administration. Her soothing words could help mollify progressives suspicious of her past role in trade deals.

Chancellor: No hyperinflation, just Weimar malaise

13 Sep 2016

Central-bank money printing hasn't produced the spiralling prices that plagued the Weimar Republic. It has, though, delivered some of the social disquiet of 1920s Germany. Policymakers urging more extreme monetary actions need to exercise caution lest they get what they wish for.

Yellen defends Fed tools but is wary of using them

26 Aug 2016

The U.S. central bank chief stood up for techniques like asset purchases, amid political attacks on the Fed's powers. But keeping lawmakers on side could constrain Yellen's choices. One example is her apparent reluctance to raise interest rates despite a strengthening case.

Chancellor: Zero-coupon bonds are not a joke

26 Aug 2016

On April Fools' 10 years ago Breakingviews suggested Washington fund itself with perpetual bonds paying no interest. The idea is now being seriously touted by some monetary policymakers. For households with cash and other assets that would evaporate, this is no laughing matter.

Detractors give central bankers too much credit

26 Aug 2016

Federal Reserve Chair Janet Yellen and other rate-setters stand accused of pursuing policies that only help the rich. Yet the supposed beneficiaries complain that loose money depresses returns and distorts markets. Both sides overestimate central banks’ control over the economy.

Iconoclasts needed to topple central bank targets

25 Aug 2016

A reboot of global monetary policymaking is the best thing that could emerge from rate-setters’ annual Jackson Hole shindig. An overhaul is pressing as reality upends more and more economic orthodoxies. Ditching simplistic and discredited inflation targets would be a good start.

Young-old financial gap calls for mature debate

17 Aug 2016

Stagnant wages, a graying population and unaffordable pensions risk leaving millennials worse off than their parents. That could be toxic for the economy, markets and even democracy. Smart policy can head off inter-generational strife, but barriers to making that happen are high.

Review: India’s new central banker must walk alone

10 Aug 2016

Former governor Duvvuri Subbarao's timely memoir shows how New Delhi pushed for easier policy, blocked hires and meddled with real-world rates. With a major overhaul of monetary policymaking in train, this underlines just how tough-minded the new RBI boss will need to be.

UK’s new bank crutch betrays post-Brexit jitters

4 Aug 2016

The Bank of England's Term Funding Scheme is a reasonable attempt to make UK lenders pass on now-cheaper funding. The bigger their loan book, the cheaper their borrowing. But opting not to restrict cheap funds to specific sectors reveals how concerned the BoE is about a slowdown.

Chancellor: Rates sow seeds for greater inequality

4 Aug 2016

Unorthodox monetary policy may have stopped a depression forming after the Lehman Brothers bust but it has had adverse distributional effects. If central bankers continue pushing the cost of money lower, they risk further undermining the social order on which capitalism rests.