Malaysia’s 1MDB purges may hurt before they help 6 Jun 2018 The central bank is the latest institution caught in the backlash over the disgraced wealth fund, with the mooted departure of its governor. More heads will roll in the bureaucracy and beyond, creating extra uncertainty just as external pressures mount and fiscal plans shift.
Volcker tweak reveals Powell Fed’s cautious streak 30 May 2018 Banks hoping for an overhaul of the prop-trading ban will be disappointed by the U.S. central bank’s modest revisions. Compliance costs may fall but Jerome Powell’s team doesn’t want Wall Street to go back to its freewheeling ways. It rightly retains distaste for big risk-taking.
Doom loop comes back to haunt Italian banks 30 May 2018 The country’s lenders have boosted their capital since the 2011 crisis, sit on a large pile of deposits and are cutting bad loans. But they still have almost 340 bln euros of Italian government bonds. This means they are vulnerable to any loss of confidence in Italy’s debt.
Investors in Italy sell first, ask questions later 25 May 2018 The radical government is not yet in place, but investors are not giving it the benefit of the doubt. Fears of a clash with the EU that forces Italy out of the euro have hit the value of shares and bonds. Party leaders’ reluctance to provide reassurance adds to market jitters.
EU sovereign debt fix fails Italian test 24 May 2018 The European Commission wants to make it easier for investors to buy bonds that pool euro zone government debt. It’s part of a plan to reduce banks' exposure to indebted states. Recent Italian worries show such securities might help, but also why they are unlikely to work.
Turkey’s FX rot demands radical measures 23 May 2018 A massive one-off rate rise is the least it will take to halt the lira’s accelerating slide to new record lows against the dollar. Even then, investors might still fear President Tayyip Erdogan’s monetary policy meddling. Capital controls would then grow more likely.
EU’s Iran sanctions riposte is late and lame 18 May 2018 The bloc took 10 days to come up with a plan that will give its companies cover if they defy U.S. restrictions. That’s unlikely to stop businesses pulling out of the Islamic Republic. The dollar’s dominance in the financial system limits Europe’s ability to offer real protection.
Indonesia picks market stability over growth 17 May 2018 Agus Martowardojo is ending his term as central bank governor the same way he began: with a rate hike. The falling rupiah forced him to move earlier than planned. Southeast Asia's largest economy will splutter as a result, but delaying action would have had graver consequences.
Italian radical agenda is a recipe for chaos 16 May 2018 A leaked plan by likely coalition allies 5-Star Movement and League says states should be able to exit the euro zone and cancel debt. That, along with a soaring budget and proposals for a shadow government, promise conflict with the EU. Bond markets are too complacent on Italy.
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.
The Exchange: Putting limits on central-bank power 4 May 2018 Central bankers emerged from the financial crisis with more clout than ever before. Can this be reconciled with democratic legitimacy? Former Bank of England Deputy Governor Paul Tucker explains why monetary authorities have become “overmighty citizens”, and how to rein them in.
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.
Nigeria’s FX reserve fetish is bad for growth 30 Apr 2018 President Muhammadu Buhari is vaunting a rapid rise in foreign exchange reserves. A decent war chest is worth having in case the naira needs defending. But accumulating a vast pile of dollars will deprive the economy of the hard currency it needs to keep growing and create jobs.
The Exchange: China’s one-man revolution 27 Apr 2018 President Xi Jinping wants to make China great again – but his “third revolution” has brought censorship, protectionism and military standoffs. China scholar Elizabeth Economy’s new book explains Xi’s muscular new approach, and offers suggestions on how the West should respond.
Mark Carney can delay UK rate rise with impunity 27 Apr 2018 A sharp slowdown in UK growth is enough reason for the Bank of England boss to defer monetary tightening. He has further grounds to hesitate since euro zone activity has slackened, with French growth more than halving in the first quarter. Discretion is the better part of valour.
Review: China experts enter their own “New Era” 27 Apr 2018 Two new books from respected scholars try to make sense of the country under Xi Jinping. Both see it fast moving toward a more centralised political regime, with messy and probably unpredictable consequences. As interesting is the shifting mood among China analysts themselves.
ECB has big enough stick to repel bad-loan revolt 24 Apr 2018 A political backlash may force the European Central Bank to ditch plans for stricter provisioning of 760 bln euros of dud loans. The saga has weakened chief supervisor Daniele Nouy, and may delay reform of Europe’s banking union. But the ECB has other tools to cut the loan pile.
Swiss central bank gets FX wish three years late 20 Apr 2018 The franc has weakened to 1.20 against the euro for the first time since the Swiss National Bank ditched its cap on the currency in January 2015. Several factors could explain why. Policymakers are unlikely to care much about the reasons given the moves may help revive inflation.
China’s surprise reserve cut exposes growth angst 17 Apr 2018 The central bank cut reserve requirements for banks, freeing $200 bln for lending. That backs up other moves to help over-stretched banks amidst a purge on loose credit. The timing, however, suggests Beijing is looking for a cushion if the economy slows, or a trade war escalates.
Watch Singapore rate decision for trade war signal 12 Apr 2018 As one of the world’s most open economies, the city-state is caught in U.S.-China crossfire. Domestic growth is strong enough to encourage the central bank to tighten policy on Friday. A decision to stay neutral will hint at the damage that rate-setters expect tariffs to inflict.