Central Banks

Capital Calls: Russian default, Inflation and debt

27 Jun 2022

Concise views on global finance: Moscow defaulted on its foreign debt for the first time in over 100 years, leaving bondholders in limbo; the Bank for International Settlements wants rates raised “quickly and decisively”, but is also worried about higher borrowing costs.

Job losses add turbulence to Fed’s softish landing

24 Jun 2022

The central bank reckons taming inflation means doubling interest rates and unemployment rising to 4.1% in 2024. Yet it expects GDP to keep growing despite the loss of about 1 mln jobs. Even if the Fed is right, the risk is that cooling consumer confidence squashes growth.

Investors need to learn to ride inflation cycle

23 Jun 2022

Bonds and shares are tumbling as prices soar, just as in the 1970s. The experience of that decade suggests value stocks, commodities and safe-haven currencies offer the best protection, says Edward Chancellor. But wild swings in inflation can still catch markets off-guard.

Capital Calls: Revlon, Bank of England

16 Jun 2022

Concise views on global finance: The makeup company filed for bankruptcy but its lasting contribution to financial history was a ruling that boards must maximize value; the UK central bank keeps concerns about runaway prices in check with a modest hike in borrowing costs.

Central bankers forget the lessons of the 1970s

16 Jun 2022

Inflation is complex, yet all sustained increases in prices have been accompanied by an expanding money supply. The Federal Reserve and other central banks ignored this the last time inflation took off, writes Edward Chancellor. There’s no sign they are learning any faster today.

ECB’s crisis weapon pledge is vague and late

15 Jun 2022

The European Central Bank will “accelerate” work on a new tool to control soaring bond yields from weak sovereigns. The lack of detail reflects divisions within the bank on when and how to use such a programme. It’s an invitation to markets to test the ECB’s resolve yet again.

Central banks still have space to fight inflation

15 Jun 2022

Jerome Powell and Christine Lagarde are tightening monetary policy to try to control soaring prices. Previous shocks have prompted the Fed and ECB chiefs to pause or loosen again. Despite plunging equity prices this time, calmer credit markets imply the “Fed Put” is far off.

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.

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.

ECB’s farewell to QE may prove premature

8 Jun 2022

The European Central Bank may on Thursday confirm plans to end its 3 trln euro asset purchase programme and raise rates in July. Weaker economies’ borrowing costs are already soaring. A mere hint that bond-buying could resume if yields jump may not be enough to keep markets calm.

Consumers are the next transitory guessing game

27 May 2022

Central bankers and investors spent months debating whether inflation was here to stay. Now that mystery applies to the financial state of Americans, who are glum about the economy but still spending. It’s a problem for the Fed, but consumers might just have staying power.

U.S. sanctions give Russia default it doesn’t need

25 May 2022

The Treasury won’t let Moscow pay U.S. bondholders, tipping it into default. The move further isolates Vladimir Putin but will have minimal impact. It’s a surreal twist given Russia can still pay its debts, while battlefield foe Ukraine urgently needs relief but isn’t getting it.

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.

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.

Egypt’s hunger pangs are like 2011, but worse

19 May 2022

A decade ago the soaring cost of bread helped unseat Cairo’s long-term ruler, Hosni Mubarak. In 2022 food prices are rising faster, and Egypt’s population and debt are bigger. The more prices rise, the trickier the tradeoff between enraging financial and domestic constituencies.

Hong Kong can afford slow road to digital currency

19 May 2022

There’s some FOMO in the local e-HKD effort. Central banks elsewhere have better reasons to act faster, including low rates of financial inclusion and less use of physical cash. Hong Kong would do well to think longer about privacy concerns and to learn from other experiments.

Using Russian assets in Ukraine would be a mistake

17 May 2022

Seizing $200 bln of central bank reserves frozen by the EU and U.S. could provide financial relief and moral comfort to the war-torn country. But it would also trigger legal fights and give Russia even less reason to back down. Confiscation is no substitute for a realistic plan.

Germany and France could make ECB’s life easier

16 May 2022

Inflation is surging in Europe’s biggest economies and the central bank is keen to avoid a wage-price spiral. If Berlin and Paris help the poorest households cope with rising costs, there may be less pressure for hefty pay rises. That would be a big help for rate-setters.

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.