Fed builds in wiggle room for rate surprises 17 Dec 2014 The U.S. central bank now puts “patience” above needing “considerable time” for changing monetary policy. It suggests Chair Janet Yellen is focusing more on data than anything else. That could stoke interpretive disagreements on the committee – but also spark unexpected hikes.
Russia’s foreign banks have varying pain barriers 17 Dec 2014 With the Russian banking system hobbled by sanctions, Raiffeisen, UniCredit and SocGen are well placed to grab market share in commercial lending. The vital factor will be how insulated they are against the current turmoil. Some look better placed to tough it out than others.
This is as good as global recovery gets 16 Dec 2014 Since 2009, each new calendar year has brought declarations of the end of the crisis and predictions of an economic upswing. This time the mood is gloomy, and with reason. Weak growth turns out to be the new normal, not part of the transition.
Rouble free fall throws Russia into ugly spiral 16 Dec 2014 The Russian currency kept falling after the central bank hiked its key rate from 10.5 pct to 17 pct, leaving policymakers with few sensible short-term options. Further out, only higher oil prices and an end to the Ukrainian stand-off can soothe markets. That’s unlikely to happen soon.
UK bank review winners and losers hard to untangle 16 Dec 2014 Standard Chartered comfortably passed the Bank of England’s tough stress test, while RBS and Lloyds just scraped through. Yet the BoE exercise was easier on emerging markets-focused lenders. The banks’ scores still leave investors with significant uncertainty about dividends.
Poor growth prospects show Germany’s weaknesses 15 Dec 2014 Europe’s supposed economic powerhouse can only grow by 1 percent a year in the long-run, according to revised Bundesbank forecasts. Misguided policies drag down Germany’s economic potential as dividends of past reforms are petering out. That’s bad news for the euro zone.
U.S. budget spat puts bankers, lawmakers to shame 12 Dec 2014 Wrangling over a change to Dodd-Frank has delayed a deal to keep the government open. The amendment may only weaken financial reform slightly. But it smells bad that Wall Street wrote and lobbied for it. Allowing it to slow a $1 trln bill is another sign of Congress’s dysfunction.
Review: "Forgotten Depression" worth remembering 12 Dec 2014 James Grant’s new book on the U.S. government’s response to the 1921 crash is a timely reminder that our forebears knew of other, apparently more efficacious, remedies to cure financial hangovers than the hair of the dog.
Draghi’s blanks make sovereign bazooka inevitable 11 Dec 2014 Euro zone banks drew just 130 billion euros of four-year loans from the ECB. The modest take-up makes sovereign purchases more likely: the ECB will need to buy sovereign debt to reach its stated balance sheet target. While QE is increasingly priced in, the challenges aren’t.
Carney the showman risks stage-managed policy 11 Dec 2014 The BoE governor wants monetary policy to be more transparent. So the central bank will publish transcripts of rate-setting committee meetings after eight years. A pre-meeting will stay secret. That’s where the real debate will happen, ahead of a performance for the record.
Politics outweighed German unification economics 10 Dec 2014 Karl Otto Poehl, who died on Dec. 9, quit as president of Germany’s central bank in 1991. He thought his government’s reunification plans were unsound. His fears were justified and his steeliness admirable. But the economics proved less important than the politics.
Rob Cox: Yellen should gird for activist investors 9 Dec 2014 Uppity shareholders have so far avoided complex banks like Citi and JPMorgan. Regulatory pressure, middling performance and a dearth of large-cap options make them increasingly attractive for shakeup artists. That may put Fed Chair Janet Yellen in a new, uncomfortable position.
UK doesn’t look ready for a rate hike 8 Dec 2014 Bank of England research suggests the impact of rate rises on mortgage holders could be manageable. If wages and rates rebound as the BoE forecasts, that might be so. But the data is sufficiently equivocal, and the UK economy sufficiently weak, to make it not worth finding out.
BoE independence faces stiff test 5 Dec 2014 Lower borrowing costs helped George Osborne plug a hole in UK tax receipts. Add the chancellor’s home-buying scheme, and the government’s interest in monetary easing is clear. It is critical for Osborne-appointed BoE Governor Mark Carney to be seen to be making his own decisions.
Brainard emerges as another Fed regulatory voice 4 Dec 2014 Wall Street may have hoped the former international hand at Tim Geithner’s Treasury would provide a counterweight to co-governor and tough watchdog Daniel Tarullo. From the gist of her first two speeches, though, she looks on roughly the same page with little love for big banks.
Rob Cox: Wall Street in grip of Geithner nostalgia 2 Dec 2014 When the former U.S. Treasury boss made a surprise visit to a recent gathering of bank CEOs, the warm welcome he received could be misinterpreted as appreciation for an old softy. In fact, it was recognition that the current regime doesn’t have its heart in financial regulation.
India may boast world’s steepest rate cuts in 2015 2 Dec 2014 The Reserve Bank resisted strong pressure from the government to start cutting interest rates from their current 8 percent. Governor Raghuram Rajan wants more proof of correction and disinflation. It may be a short wait. A weak economy urgently needs lower borrowing costs.
ECB could easily manage QE sovereign risk 2 Dec 2014 Critics say sovereign bond-buying could expose the ECB to risky countries and possibly trigger fiscal transfers. The argument is good in theory. Yet based on the ECB’s target, the exposure could be lower than in 2013 – when the central bank held more debt from the periphery.
Putin’s Russia can’t easily escape rouble debacle 1 Dec 2014 The Russian currency is sinking along with the oil price. A central bank interest rate hike would hurt the struggling economy. Reforms reducing the country’s dependence on oil might increase confidence, but Western sanctions are squeezing the government and the financial system.
Japan downgrade out of step with new QE world 1 Dec 2014 By normal debt logic, Moody’s is right to lower the rating of a sovereign struggling to cut its huge deficit. But yields keep falling as the central bank effectively monetises. The lesson: money-printing governments can always dodge default – and they may duck inflation too.