Central Banks

“Japanisation” of ECB will blight Europe’s banks

25 March 2019

Weak economic activity is raising the chances of the European Central Bank copying its Japanese counterpart, which has kept rates ultra-low for two decades and adopted ever more radical measures to boost inflation. Lenders in Japan show European peers the heavy toll that takes.

Trump takes politics to heart of Fed with nominee

22 March 2019

The president wants to put conservative commentator Stephen Moore on the central bank board. The former campaign aide helped draft the administration’s tax cuts and has called for Fed Chairman Jerome Powell to resign. It’s a troubling shift from more expert, independent choices.

Thailand’s vote may solve just one problem

21 March 2019

A poll on Sunday will end five years of military rule. The best outcome would be an uncontested one, even if the junta leader stays on. A democracy of sorts could well encourage some private investment, but none of the likely winners seem ready to tackle a sclerotic economy.

Fed waves white flag on normalization

20 March 2019

The U.S. central bank held interest rates steady, cut its forecast for hikes and will stop shrinking its balance sheet in September. There are signs of slowing global and domestic growth, but the package looks more like a market wish list than the result of data-driven analysis.

ING’s Italian ban is model in dirty-money fight

18 March 2019

The Bank of Italy has barred the Dutch lender from accepting new clients in the country until it tightens money-laundering controls. The sanction lacks the punch of ING’s recent $900 mln Dutch fine. But bans may be more effective when forcing Europe’s banks into action.

Hadas: A bluffer’s guide to the MMT debate

6 March 2019

So-called modern monetary theory might be gaining respectability, after the radical approach was touted along with a huge “Green New Deal” by U.S. Democrats. Mainstream economists are fighting back. The debate, riddled with politics, hinges on at least five questions.

UK banks’ Brexit flak jackets look durable

12 March 2019

The Bank of England has told some lenders to triple their liquid assets in case of a hard Brexit, according to the FT. Lenders have quadrupled their easy-to-sell securities to 1 trillion pounds over a decade. Standby central bank funds provide extra armour in a no-deal scenario.

French banks’ pain may worsen

8 March 2019

The Bank of France may raise capital buffers to dampen loan expansion. That is justified given credit is growing much faster than the economy is expanding. But combined with pitiful lending margins, the move would add to the profitability problem which is plaguing Gallic banks.

With friends like Draghi, banks don’t need enemies

7 March 2019

European Central Bank President Mario Draghi is going to offer lenders new long-term loans. But his plan to keep policy rates at record lows for longer makes their lives harder. And if growth turns out to be as weak as the ECB now expects, more of the loans they make may go bad.

Resurgence of carry trades is riddled with risk

6 March 2019

Borrowing low-rate currencies to invest in higher-yielding ones is back in vogue. That’s because major central banks are deferring policy tightening and volatility is low. One or the other of these reasons may all too easily vanish, leaving followers of the trend high and dry.

ECB stimulus flows show why Draghi works so hard

6 March 2019

President Mario Draghi bought 2 trln euros of government bonds to boost the economy. But some proceeds were used to buy debt issued by non-euro zone companies, or left in bank deposits, the BIS says, diluting the impact. Though mainstream, money-printing remains an imprecise tool.

Mario Draghi is boxed into being generous to banks

5 March 2019

The European Central Bank boss is expected to announce more cheap loans in the coming months. New regulations may otherwise cause a credit crunch just as the euro zone economy is slowing. Monetary policymakers will have little choice but to paper over a two-tier banking system.

Zimbabwe offers a way to test blockchain’s worth

5 March 2019

Even after a 60 pct devaluation, Harare’s monetary credibility is irreparably broken. That should make it an ideal test case for distributed ledgers replacing ropey central banks. Yet citizens’ justifiable distrust of the state doesn’t mean ceding monetary control is an easy fix.

Kashmir attack exposes the limits of India’s clout

20 February 2019

New Delhi has vowed to secure the “complete isolation” of Pakistan after one of the deadliest assaults in years. Yet Islamabad’s strategic value to Beijing and Riyadh makes that unrealistic, leaving Premier Narendra Modi with few options to show strength ahead of an election.

Review: The People’s Republic turns left

15 February 2019

China’s slowing growth has rattled markets around the globe. In “The State Strikes Back”, Nicholas Lardy argues it’s because Beijing has strayed from the path of reform. His persuasive analysis raises fundamental questions about the relationship between politics and the economy.

Chancellor: A 300-year lesson in bubble inflation

13 February 2019

In December 1718, the newly nationalised Banque Royale became France’s first de facto central bank. Under Scotsman John Law, it proceeded to issue paper money in what was arguably the first instance of quantitative easing. Central bankers take note: it ended very badly.

Bank of Italy attack shows growing radical bravado

12 February 2019

Government leaders vowed to overhaul the central bank’s board, citing past bank failures. The intervention looks like political swagger as rivalry within the League and 5-Star coalition gets fiercer. Existing rules should shield the regulator, but other institutions are at risk.

Jerome Powell’s boon is Mario Draghi’s bane

11 February 2019

Inflation in the U.S. and the euro zone is easing and looks set to subside further. That will help the Federal Reserve boss justify a pause in rate hikes, but is a headache for his European Central Bank peer who has yet to tighten monetary policy and has less room to manoeuvre.

Japan’s foreign invaders could use domestic allies

11 February 2019

From sumo rings to convenience stores to boardrooms, immigrants are changing the way the world’s third-largest economy works. Their presence is politically awkward, but demographically essential. Policies that internationalise Japanese citizens would help ease the transition.

India’s rate cut fuels fears of a yes-man governor

7 February 2019

A surprise move to trim the cost of borrowing, less than a week after an expansionary budget, will raise concerns that freshly appointed Shaktikanta Das is dancing to New Delhi’s tune. An election, after all, is months away. Lacklustre price increases, though, provide some cover.