Central Banks

Fed wrestles the unpredictable and the unintended

18 September 2019

Cutting interest rates again was the easy part. The whimsical trade policy of President Donald Trump and threats to oil supplies call for insurance. But stress in money markets is partly the U.S. central bank’s own handiwork. Chair Jay Powell is discovering the Fed’s new normal.

ECB’s Super Mario channels a new cartoon hero

12 September 2019

Mario Draghi unveiled a rate cut and new asset purchases, his parting gift as central bank chief. While he shares a name with Nintendo’s famous plumber, the open-ended buying smacks of Toy Story’s Buzz Lightyear. Markets seem to think stimulus will last to infinity and beyond.

Indian bank merger extravaganza will hurt first

3 September 2019

New Delhi wants to combine 10 state-owned lenders into four, as it cleans up a sector weighed down by bad debt. But job cuts are ruled out, putting synergies out of reach, and a recent combination of three others destroyed value. It's a costly distraction for a flailing economy.

New Delhi’s central bank raid helps by half

27 August 2019

The record $25 bln being transferred to the government should help Prime Minister Narendra Modi’s stimulus plans. State lenders could use the funds more than the well-cushioned RBI. It would be imprudent to recapitalise them, however, without accompanying governance changes.

Fed chief crafts central banker’s serenity prayer

23 August 2019

Jay Powell hopes to control what he can and rise above what he can’t. His speech at Jackson Hole highlighted trade battles, which he can’t influence, as a new challenge for rate-setters. But his tone suggests more willingness to weigh policy threats when shaping monetary policy.

China’s rate reform inches along the market path

19 August 2019

The central bank is shaking up loan pricing, pushing aside a long-standing benchmark set by officials. It’s an overdue step designed to ease credit conditions and help companies borrow. Transmission problems remain, but a move closer to a more responsive system is welcome.

Baht’s brawn weakens sick man of Southeast Asia

19 August 2019

Thailand’s $500 bln economy expanded at its slowest rate in nearly five years last quarter, hit by cooling exports and tourism. Yet its currency is an outperformer, aggravating both problems. Lower rates and public spending could weaken it, as might investing more funds abroad.

Brexit makes Carney less of a central bank oddity

1 August 2019

Bank of England boss Mark Carney is, like everyone, in the dark about whether Britain will crash out of the EU. Without that uncertainty, he might be tightening policy when peers are either easing or hinting they might. Being odd man out would be better than the current limbo.

Jerome Powell finds another way to please nobody

31 July 2019

The Fed chief presided over a quarter-point interest-rate cut on Wednesday, disappointing investors, presumably the president, and even some colleagues. Most people have enough worries, real or not, to want lower borrowing costs. Most economic statistics, though, say not yet.

Hong Kong fills best worst job in central banking

26 July 2019

As the new head of the HKMA, Eddie Yue is on track to get a salary that puts U.S. Fed chief Jay Powell in the shade. A pegged currency means he needn’t fret much about rate-setting or attacks on his independence. The catch: if problems really escalate, he has fewer tools.

Markets want to see colour of Mario Draghi’s money

25 July 2019

The European Central Bank chief opened the door to even looser monetary policy. The dearth of decisions or details meant the euro reversed initial losses while bond and stock prices gave up brief gains. He will have to deliver on his big promises before investors give him credit.

Swiss currency ticks towards new showdown

22 July 2019

The franc hit a two-year high against the euro. Policy interest rates are already negative so cutting them further may fail to dent its strength. A return to major intervention risks U.S. ire. Traders will take advantage of central bank boss Thomas Jordan’s bind.

Seoul rate-setters bat for trade accord with Tokyo

18 July 2019

A surprise cut to borrowing costs underscores growth concerns as South Korea faces export curbs from its neighbour. The central bank has little more space to ease. That puts the onus on President Moon Jae-in to pass a stimulus package and to de-escalate regional tension.

New UK banknote just about passes Turing test

17 July 2019

With cash use shrinking and high denominations favoured by crooks, there are reasons to scrap big bills. But a revamp of the 50-pound note, picturing the mathematician, is intelligent enough. Unlike, say, 500 euros, it still fits a system shifting slowly to digital payments.

China’s awkward rate-setting status quo to persist

12 July 2019

The central bank may want to half-follow a U.S. rate cut expected later this month. Yet officials have been looking to scrap the benchmark rate that offers the most direct way to do so. With so much at stake, however, the current half-reformed setup could prove tough to shake.

New breed of central bankers is harder to read

11 July 2019

Jerome Powell at the Fed and Christine Lagarde, nominated to be the next ECB chief, are lawyers by training. Their thinking is more fluid than predecessors whose economic tenets informed a world view. That has benefits, but also means it’s harder to predict how they will react.

Hadas: Bond markets lost in inflation-growth gap

10 July 2019

Changing growth expectations explain most daily movements in bond prices, while falling inflation parallels the long-term trend of declining yields. Every so often, however, market gyrations reflect hopes that growth and inflation will reconnect. There’s little sign of that.

Deutsche creditors give ECB charity short shrift

9 July 2019

The banks regulator is aiding the German lender’s revamp by letting it run on a lower capital ratio. In response, Deutsche Bank’s hybrid bond yields spiked. A botched overhaul would be bad for creditors – and also the central bank’s credibility.

Global central bank assault claims Turkish victim

7 July 2019

Desperate to boost growth, President Tayyip Erdogan has fired the country’s central bank chief. He’s the latest casualty of a worldwide attack on independent monetary authorities. The blow to confidence makes any cut in the main rate, held at 24% since September, more damaging.

Review: The conundrum of no good jobs

5 July 2019

Low unemployment in the U.S. and UK hides a grimmer reality, economist David Blanchflower argues in his new book. Weak wage growth and widespread despair have prompted people to turn to populist leaders. He makes a compelling case for why policymakers can still rev up growth.