BoE wrangle reflects rate setters’ identity crisis 22 Jun 2018 The opposition Labour party wants the Bank of England to include productivity targets in its mandate. The idea seems flawed - monetary policy is a weak tool for boosting efficiency. But it reflects a growing political dissatisfaction with independent yet impotent central banks.
Mark Carney may flummox markets again 10 May 2018 The Bank of England chief’s latest comments made investors doubt he will tighten monetary policy this year. Such scepticism is overdone. The economy doesn’t have to grow very fast to generate inflation and the jobless rate is very low. Rate expectations could shift once more.
Review: Saving central bankers from the mob 4 May 2018 How much influence should technocrats wield in a democracy? That’s the question former Bank of England Deputy Governor Paul Tucker attempts to answer in “Unelected Power”. His reply is thoughtful and robust but might end up drowned out by fractious politics or another downturn.
Quest for central bank transparency has limits 5 Apr 2018 UK rate-setters are debating the merits of more openness, by for example issuing official interest rate forecasts, the Financial Times reports. More information may not mean more insight. After all, good policymakers change their minds when the economic environment does.
Stars align for Mark Carney to raise rates again 22 Mar 2018 UK inflation is high enough for the Bank of England boss to further tighten policy in a couple of months but not so high as to hurt consumer demand, especially as wages are picking up. And Brexit poses less of an immediate danger. Politics and economics are both on Carney’s side.
Review: Why Brexit will ultimately please nobody 15 Dec 2017 Britons voted to leave the EU for myriad and conflicting reasons, according to “Brexit and British Politics”. It’s hard to see a settlement that addresses them all. The risk is that voters see Brexit as another betrayal by politicians, fuelling the disaffection that caused it.
Sorry is the hardest word for central bankers 16 Nov 2017 Bank of England Chief Economist Andy Haldane says rate-setters should speak simply and honestly to the public. The first is easier than the second. Admitting past mistakes or doubts about the present is tough for institutions whose clout depends on an aura of omnipotence.
Central bankers go self-referential on rhetoric 14 Nov 2017 Fed Chair Janet Yellen and other top rate-setters took the stage in Frankfurt to discuss how they communicate. It’s a slightly meta admission of the role speechifying has come to play in monetary policy in an era of ultra-low interest rates. But wordiness brings its own perils.
Central bankers’ superpowers are looking spent 2 Oct 2017 Between taming inflation, fighting the financial crisis and averting a breakup of the euro, monetary policymakers acquired an aura of omnipotence. Their responsibilities are growing and their mandates have turned into a fetish. A painful collision with reality is overdue.
UK banks are trapped in a pincer movement 25 Sep 2017 The Bank of England says lenders will face higher capital requirements – and all the more so if they are vulnerable to consumer loans souring. Meanwhile the opposition Labour party wants to cap credit card interest. Investors may have to give up hopes of ever-larger dividends.
What Carney can learn from Yellen 21 Sep 2017 Fed Chair Janet Yellen showed rate-setters can shock markets even when they stick to the script. That’s a lesson for the Bank of England’s Mark Carney, who has talked up a rate rise this year. Like her, he may have to hike without having solved a host of economic puzzles.
Bank of England puts price on bond fund stupidity 12 Jul 2017 Regulators worry that the growth of open-ended bond funds could cause fire sales. A central bank paper estimates that could add nearly half a percentage point to companies’ funding costs. Pointy-headed analysis should reinforce the case for more sensible investment models.
Bank of Japan can hold out as Western yields rise 7 Jul 2017 The central bank underlined its determination to keep 10-year yields close to zero by offering to buy unlimited bonds. The BOJ has the tools, market dominance and motivation to hold firm. Tighter policy in the West should help Japan by weakening the yen and importing inflation.
Draghi’s taper tizzy is sign of dangers to come 29 Jun 2017 Comments by ECB chief Mario Draghi drove up bond yields and the euro, despite later protestations that markets had misread him. The ado owes more to investor complacency than fuzzy talk. It highlights traders’ twitchiness and the challenges in withdrawing ultra-loose policy.
Hadas: Misbehaving wages keep economists baffled 7 Jun 2017 Conventional economic theory says wages start to rise when labour markets tighten. It isn’t happening in the U.S., Britain, Japan or Germany. Many semi-plausible excuses and partial explanations have not solved the mystery. That leaves central bankers in a quandary.
Return on equity is fair game for bank regulators 27 Mar 2017 The Bank of England's next stress test will assess if lenders’ earnings exceed their cost of equity. That might sound like statist meddling, or doing investors’ job for them. But as a way to stop banks taking silly risks to offset low rates, it makes sense.
Hogg exit only half solves Bank of England problem 14 Mar 2017 The central bank’s deputy governor has resigned after a UK parliamentary committee criticised her for failing to disclose a conflict of interest. Better late than never. However, the BoE’s tardy response to the affair has exposed a tin ear that will require attention.
Bank of England deputy governor Hogg should resign 13 Mar 2017 Charlotte Hogg failed to inform the UK central bank that her brother works for Barclays. While a sin of omission, it’s serious for an institution that holds itself and others to a high standard. If she stays, it would hurt the bank’s reputation.
Regional pain makes UK consumer credit risks real 6 Jan 2017 The BoE's chief economist says a merely moderate rise in housing finance means consumer borrowing risks are contained. But unemployment is up in Scotland and northern England, where faster-growing personal loans matter more. Banks' pricing competition could worsen the reckoning.
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.