Monetary Policy

Inflation raises stakes in Hungary’s EU war

17 Jun 2022

PM Viktor Orbán’s tight political grip largely kept investors happy. Yet inflation fears are now pushing the forint to record lows. Unlocking 7 bln euros in EU funds could restore the autocrat’s power-and-prosperity sweet spot. That makes his hostility to the bloc more costly.

Fed drives a stake into own rate-setting newthink

15 Jun 2022

A 75-basis-point rate hike, the biggest since 1994, was a rational response to surging prices. It’s also the death knell for Federal Reserve boss Jay Powell’s focus on making monetary policy more flexible and inclusive. Bold innovation is best left until prices have settled down.

Crashing yen disturbs Haruhiko Kuroda’s zen

15 Jun 2022

Japan’s currency is at its weakest against the U.S. dollar since 1998 and bond traders are revolting. It disrupts the central bank governor’s meditations on the mystical balance between growth, public debt and near-zero rates. Stagflation risk suggests a new mantra is warranted.

ECB caught in a rate quagmire of its own making

20 May 2022

The European Central Bank may raise rates in July but is divided on how high it should go. By then, weakening growth will make it harder for President Christine Lagarde to end the eight-year era of negative rates. Moving earlier to curb inflation would have avoided the dilemma.

Inflation revives spectre of the long bear market

19 May 2022

The S&P 500 Index has fallen almost 20% from its early January peak. Such downturns have become shorter and less frequent due to support from the Federal Reserve, says Edward Chancellor. But rising prices have removed the safety net. The next selloff could inflict more damage.

Chelsea’s generous buyer, U.S. inflation pain

12 May 2022

Roman Abramovich is selling the soccer team to a group led by LA Dodgers co-owner Todd Boehly for $3 bln. In this Viewsroom podcast, Breakingviews columnists discuss the chunky valuation and the owner’s spending plans. Also, high prices are hitting the rich as well as the poor.

Capital Calls: Turkey, Nintendo/Sony, India IPO

10 May 2022

Concise views on global finance: President Erdogan makes another ham-fisted monetary intervention; the Switch maker weathers supply chain ructions better than its larger rival; New Delhi needs to be even more generous in its landmark listing of Life Insurance Corp of India.

Zimbabwe borrows from bank of bad ideas, again

10 May 2022

With inflation at 96%, Harare plans to stop further currency slumps by a ban on bank lending. That stymies a sly trade where insiders play the spread between official and black-market FX rates. But as with prior moves it’s a blunt tool that erodes rather than builds confidence.

Andrew Bailey unwillingly channels Paul Volcker

5 May 2022

The Bank of England boss raised rates to 1% to curb high inflation and may hike further despite the risk of recession. It’s old-school policymaking as practised by the former Fed chief. The more central banks behave this way, the more likely and severe a global downturn will be.

Explaining the Fed’s tolerance for high inflation

21 Apr 2022

U.S. prices are rising by more than 8% a year, yet the central bank only just started raising interest rates. One possibility is that it fears a financial crisis, Edward Chancellor argues. Another is that inflation is the least painful way to resolve deep-seated social conflicts.

Draghi’s bond-buying triumph lacks obvious sequel

13 Apr 2022

The ECB’s plans to tighten monetary policy and the Ukraine war revive fears that weak euro zone members’ borrowing costs will soar. Though the former central bank boss tamed debt spreads in 2012, a repeat is tricky. Besides, governments that struggle can use tools Draghi devised.

Russia takes big step towards default

7 Apr 2022

Russia will pay foreign bondholders roubles instead of dollars. A default looks likely after a 30-day grace period. Many investors, stuck with a currency they can’t use and facing an uncertain legal battle for any recovery, may prefer to take losses today and sell.

Rouble’s strength is sign of Russia’s weakness

6 Apr 2022

The Russian currency has appreciated 70% against the dollar since early March. Capital controls, 20% interest rates, and forced conversion of export revenues have been enough to push it up in very thin trading volumes. The rebound is a sign of economic woes, not resilience.

Inflation regime shift looks scarily plausible

6 Apr 2022

Fed boss Jay Powell and other global rate-setters admit surging prices warrant policy action. Where they disagree is how forcefully they need to combat such pressures. The BIS, the umbrella body for central banks, says a new inflationary era may lie ahead. Its case is persuasive.

Strong U.S. jobs are blessing and curse for Fed

1 Apr 2022

The unemployment rate fell to 3.6%, near pre-pandemic levels. Dining out is back, and even travel is returning to normal. That all gives the central bank room to fight inflation. But employers are still short of workers, and continued robust hiring may make price pressures worse.

Christine Lagarde’s inflation excuses wear thin

1 Apr 2022

Euro zone prices rose at a record annual rate of 7.5% in March, almost as much as in the United States where the Fed has started hiking rates. There’s more going on than just surging energy costs. It’s getting harder for the European Central Bank boss not to follow Jerome Powell.

Chancellor: The battle for investment survival

31 Mar 2022

Despite Russia’s invasion of Ukraine, U.S. stocks still trade at sky-high levels. Meanwhile, the return of inflation means more market volatility. Passive investment strategies that have thrived for years won’t work in this new environment. A more nimble approach is required.

Bank of Japan stumbles into defensive minefield

29 Mar 2022

War, Covid-19 and an aggressive-looking Fed are conspiring against Governor Kuroda’s ultra-loose policy. The yen is plunging and government bond yields are up despite BOJ efforts. There’s no easy solution, but doing nothing is risky too.

Britain’s limp economic fix leaves need to do more

23 Mar 2022

Finance minister Rishi Sunak cut taxes on fuel and incomes to ease a cost-of-living squeeze. Still, the measures are blunt and less generous than countries like France. With energy bills set to soar, he’ll soon need to dip into the 30 bln pounds of wiggle room he has left over.

UK is in monetary policy vanguard for new reason

17 Mar 2022

The Bank of England raised rates for a third meeting running. Governor Andrew Bailey started tightening policy sooner than peers at the Fed and ECB, but is now toning down his talk about future hikes because of growth worries. Where he leads, others may once again follow.