BoE remedy can only be partial cure for UK ills 29 Sep 2022 The UK central bank launched $70 bln of bond-buying after PM Liz Truss’s budget triggered market chaos. That has stemmed a financial crisis among indebted pension funds. Stopping the market exerting economic pain requires a fiscal rethink from politicians, not more BoE action.
Behind Britain’s self-inflicted financial crisis 28 Sep 2022 Sterling fell to a record low and gilt yields soared after finance minister Kwasi Kwarteng unveiled a raft of unfunded tax cuts. In this Viewsroom podcast, Breakingviews columnists explain the long-term damage to the UK’s credibility and what will rebuild investors’ confidence.
BoE’s bond-buying U-turn is worth the risk 28 Sep 2022 The Bank of England will buy UK sovereign debt and delayed sales of its $915 bln bond portfolio due to market “dysfunction”. The danger is Governor Andrew Bailey looks too close to the government whose tax cuts caused the turmoil. Yet calmer markets make it easier to hike rates.
UK swaps one cost-of-living crisis for another 27 Sep 2022 The Bank of England may raise rates past 5% to stem the inflationary effect of Chancellor Kwasi Kwarteng’s tax cuts. Homeowners, saved by the government’s energy price cap, now face a surge in mortgage costs. That will sap growth and add to pressure for banks to help customers.
Trussonomics may freak out the markets 5 Sep 2022 If the UK’s new prime minister was only planning big energy subsidies, investors might not worry too much. But Liz Truss is also planning tax cuts – and may pick fights with both the Bank of England and European Union. If so, the pound could be clobbered, says Hugo Dixon.
Capital Calls: Bank of England’s dark clouds 4 Aug 2022 Concise views on global finance: The UK central bank predicts inflation will hit 13% and the economy will slip into recession just as Boris Johnson’s successor as prime minister takes charge.
Boris Johnson’s woes obscure deep UK divisions 6 Jul 2022 The UK leader’s grip on office is slipping after senior cabinet members resigned. But his exit saga masks disputes over key issues like taxes, state intervention and relations with the EU, amid the UK’s singular economic mess. A new leader will find them even harder to reconcile.
UK lacks fiscal plan to buffer coming slowdown 13 Jun 2022 GDP has shrunk for two consecutive months while growth and inflation forecasts are the worst in the OECD. The Bank of England is fighting runaway inflation with ever-higher rates. As Brexit exerts an additional drag, the government needs a bolder approach to spending.
BoE pours cold water on bank global-warming panic 24 May 2022 The watchdog’s stress test showed UK lenders can weather a chaotic climate switch without a capital hit. For bank CEOs copping flak for funding polluters, it’s a let-off. The other lesson is that governments will get little help from financial regulators in greening the economy.
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.
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.
Andrew Bailey pay rise clanger has tiny PR upside 7 Feb 2022 The Bank of England chief’s call for wage restraint has gone down badly with workers facing soaring prices. The ensuing controversy, has, however, done more to inform the public about the central bank’s mission to control inflation than many past communications campaigns.
New Bank of England guessing game begins 3 Feb 2022 A second rate rise in as many months raises the question of how quickly Governor Andrew Bailey will reduce bond holdings accumulated during the pandemic. A gradual approach won’t cause economic or market pain. But debt yields will become more volatile once the Fed follows suit.
Banks’ rate-rise rewards may be bigger than ever 17 Jan 2022 Deposits at large U.S. lenders are up by a third since 2019 to $11 trln. They’ve stashed much of the cash in central-bank reserves, which immediately earn more as rates go up. Tighter monetary policy usually helps banks, but especially so given their current mix of assets.
Trailblazing UK rate rise may pay off in the end 16 Dec 2021 The Bank of England is the first major central bank to hike its policy rate. The ECB faces less acute price pressures and the Fed must consider the job market alongside inflation. It’s a gamble, but acting now means British rate-setters will have less hiking to do in the future.
Omicron may give inflation a chance to bed in 29 Nov 2021 The new coronavirus variant could ease short-term price pressures if it triggers wider lockdowns that curb consumption. But if it prolongs supply-chain problems the reverse will be true in the longer term. Especially if cautious central bankers delay tightening monetary policy.
Central Europe is monetary policy’s control test 8 Nov 2021 The Czech, Polish and Hungarian central banks are hiking interest rates, the traditional riposte to rising inflation. In contrast, peers in major economies are responding less aggressively to price pressures. That makes for an interesting experiment.
UK wades into central banks vs. markets fray 4 Nov 2021 Bank of England boss Andrew Bailey has a different mandate from Fed Chair Jay Powell. But his basic challenge is the same: persuading investors that interest rates won’t rise as much as they think next year. The Briton’s old-school inflation target makes his job harder.
Rishi Sunak pays if BoE inflation bet goes awry 22 Sep 2021 Surging prices mean the UK finance minister has to pay more interest on outstanding debt. Blame Britain’s love of bonds tied to inflation. The bill will be even bigger if price pressures are more stubborn than the Bank of England expects, forcing hasty monetary policy tightening.
Capital Calls: Microsoft’s buyback, Railway M&A 15 Sep 2021 Concise views on global finance: the software giant’s $60 bln stock repurchase plan is smaller than it sounds; meanwhile, a tangled takeover battle for train operator Kansas City Southern takes a messy new track.