Inflation dip puts central bankers in a pickle 27 Jul 2023 The Federal Reserve and ECB once again hiked interest rates. Yet US price rises are easing with few signs of economic pain. In this Viewsroom podcast, Breakingviews columnists discuss how this phenomenon, dubbed ‘immaculate disinflation’, complicates what policymakers do next.
UK inflation dip puts Andrew Bailey on the spot 19 Jul 2023 The growth in UK consumer prices slowed more than expected in June, to 7.9%. It’s welcome news for households, and sent British stocks soaring. The Bank of England governor, though, is likely to keep hiking rates, increasing the risk he will go too far.
New Aussie central bank boss faces two-front war 14 Jul 2023 Deputy Governor Michele Bullock is replacing Philip Lowe. She’ll wield less power in a more independent institution than her gaffe-prone predecessor. The inside pick offers stability as the Reserve Bank battles an economic slowdown and the prospect of El Nino-driven inflation.
Andrew Bailey’s silence is hurting UK homeowners 12 Jul 2023 Traders’ confusion over the Bank of England’s decisions is sending market interest rates wild. That has pushed the cost of a popular mortgage to a 15-year high. To limit household pain, the governor needs to ditch his usual reticence and tell markets that they are wrong.
Why central banks cannot relax in inflation fight 4 Jul 2023 Western policymakers have frantically hiked interest rates to dampen consumer prices. In this Exchange podcast, Claudio Borio, a top official at the Bank for International Settlements, argues that rate-setters need to keep going to ensure costs of living won’t stay elevated.
The next revolution in monetary policy is underway 30 Jun 2023 Central banks are grappling with rising prices and fragile financial markets, raising doubts about their focus on price stability. Recent interventions by the International Monetary Fund and Bank for International Settlements are signs of a broader rethink, says Felix Martin.
Central banks’ calls for pay restraint ring hollow 29 Jun 2023 Western central bankers want workers to ask for lower raises unless firms cut their margins to compensate staff. With salaries growing less than inflation, that’s a harsh demand. Past rate rises will in time cool labour markets. Officials need to talk less and wait longer.
Bank of Italy pick will give Italy an EU headache 28 Jun 2023 ECB member Fabio Panetta is heading home to lead the national central bank. That will remove a dove from Europe’s rate-setters, just as they pursue a hard line on inflation. To send another Italian to Frankfurt, premier Giorgia Meloni may need to compromise on Brussels issues.
Credibility crisis requires BoE to write new plot 20 Jun 2023 The Bank of England’s inflation outlook is faulty because it relies on traders’ expectations. That leads markets to overreact to data, causing pain for homebuyers and firms. Adopting the US system, where policymakers make predictions, would curb policy mistakes and volatility.
Fed’s pause is now easier to extend 14 Jun 2023 Chair Jerome Powell’s rate-setting crew snapped its long streak of hikes. With the banking crisis stabilized, the FOMC can refocus on prices. Inflation persists, but is moving in the right direction, and there’s less reason to hew to investors expecting a fresh increase in July.
ECB’s autopilot raises risk of hard landing 14 Jun 2023 The European Central Bank is set to hike rates on Thursday and again in July. But traders’ hopes for cuts soon afterwards may be dashed, given pressure from hardline countries to tame stubborn inflation. Europe’s recovery is looking increasingly fragile.
Fed’s rate hike habit will be hard to kick 13 Jun 2023 The US central bank is mulling a pause after raising interest rates at its last 10 meetings. In this Exchange podcast, Morgan Stanley chief economist Seth Carpenter lays out the calculus behind the Federal Reserve’s next move, and why it’s so hard for policymakers to pivot.
ECB’s crisis tool works best if it’s never used 30 May 2023 The European Central Bank is touting its powers to buy sovereign bonds if they come under attack from the market. That has kept traders in check, so far. The trick for Frankfurt officials is to convincingly threaten to deploy emergency measures without ever having to.
Central bankers face a balance sheet reckoning 26 May 2023 Assets held by central banks have exploded since 2008. As interest rates rise, some of those institutions are slipping into the red. We’re told normal accounting rules do not apply. However, losses erode inflation-fighting credibility and independence, argues Edward Chancellor.
Erdogan part three would be worse and the same 18 May 2023 The Turkish president is in a heated battle to lead the battered country. In this Viewsroom podcast, Breakingviews columnists discuss the risks Turkey faces if he stays in office, his rival’s offering and how the outcome of the election will impact the rest of the world.
BoE pioneers can make a virtue out of uncertainty 11 May 2023 The Bank of England is living a central bank nightmare. Inflation is 10.1% but growth is stalling. After hiking by 25 basis points, its best option is to avoid the playbooks of US and European peers, pause and be ready to loosen or tighten policy based on what the economy does.
Lagarde fine-tuning will aid sputtering euro zone 4 May 2023 The European Central Bank’s move to raise rates by just 25 basis points and speed up its exit from bond-buying signals a less aggressive approach. High inflation calls for more hikes, but Frankfurt’s decision to use a scalpel rather than a hammer will benefit Europe’s economy.
ECB risks interest-rate blunder after messy data 2 May 2023 The European Central Bank is none the wiser following a raft of new numbers. Lenders may be reining in credit, but headline inflation is rising. Hardliners will still push for a 50 basis point hike on Thursday. The uncertain conditions call for an increase half that size.
Orbán’s central bank attack is self-defeating 28 Apr 2023 Hungary’s premier has picked another fight with Europe by meddling with the country’s rate setter. That could complicate the release of over 10 bln euros of frozen EU aid. With sky-high inflation and zero growth, the autocratic leader may soon face a foreign investors’ strike.
Digital “Chicago Plan” fixes many financial woes 28 Apr 2023 In the 1930s, economists drew up a radical blueprint to create safer banks. The advent of digital currencies issued by central banks is an opportunity to revisit the idea, writes Edward Chancellor. A shift could stabilise banking, reduce inflation, and even lower government debt.