Only Putin can stop rouble’s fall 7 Nov 2014 Russia’s currency is sinking. The central bank is blameless. Neither intervention nor higher rates can support the rouble. The economy is deteriorating and reform hopes are fading as Moscow retreats into isolation. The situation will persist until the president changes policy.
Japan’s banks may swap old nemesis for new foe 7 Nov 2014 The central bank’s bond-buying spree will relieve lenders of the burden of financing an overextended government. But if companies don’t invest, lenders may use cheap cash to stoke bubbles in stocks and property. Japanese banks may start living more dangerously than before.
Unrepentant Draghi rams message home 6 Nov 2014 The European Central Bank president has resisted hardliners’ efforts to rein him in and slow down monetary easing. His press conference comments were clear: other tools will be used if the euro zone economy needs them. The euro fell as soon as investors saw hawks in full retreat.
Rising ECB opposition could be Draghi’s albatross 5 Nov 2014 Some members of the ECB’s governing council are frustrated at Mario Draghi’s policies and personal style, Reuters has revealed. Divergences are normal within central banks, and the ECB president is still backed by a solid majority. But from now on he’ll have to be more careful.
Bank of Japan bond vault may resemble a black hole 5 Nov 2014 The central bank will suck more than 7 percent of outstanding government bonds into its gravitational pull next year. The longer this goes on, the stronger the investors’ belief that they will never see that debt again. Any dent in that confidence could be highly upsetting.
BoE leverage rule is complex, kind and incomplete 31 Oct 2014 UK bank shares rallied after the regulator published requirements for equity-to-assets of up to 4.95 pct, but not until 2019. The BoE’s move to peg gross leverage to risk-weighted thresholds should prevent arbitrage, but fails the simplicity test. It is also a work in progress.
Draghi can only dream of moving like BOJ’s Kuroda 31 Oct 2014 The ECB chief might fantasise about taking big decisions with a one-vote margin, as the Bank of Japan leader just did. But realpolitik requires a goodly majority. The euro zone’s inevitable compromises complicate Draghi’s fight against stubbornly low inflation.
Japan’s bulked-up bazooka is last chance for QE 31 Oct 2014 The Bank of Japan is cranking up its bond-buying just as the Federal Reserve winds down. But even the Japanese central bank is becoming more sceptical of quantitative easing. If 2 percent inflation proves elusive, the BOJ will need even bolder policies - or to throw in the towel.
QE gave emerging markets brief gains, lasting pain 30 Oct 2014 Six years of money-printing in the United States have ended. The $4 trillion splurge may have averted a deeper slump. But for developing countries it fueled a credit binge while bringing only a fleeting boost to growth. Many will now struggle to boost output and repay the debt.
Fed has little to show for QE experiment 29 Oct 2014 Three rounds of bond purchases worth nearly $4 trln over six years just ended. Critics’ feared inflation hasn’t arrived. Yet despite the stimulus, U.S. GDP growth has been stuck at just over 2 pct. The only clear effect may have been to boost asset prices, particularly stocks.
Sweden’s bold zero rate won’t fix deflation 28 Oct 2014 While other countries mess with tiny numbers, the Swedish central bank has set its policy rate at an unequivocal zero. The boldness is striking, but the Riksbank hasn’t resolved the global mystery of inflation falling when growth is reasonable. Nor will zero reverse the trend.
Italy’s bank debacle could be useful for Renzi 27 Oct 2014 Italian banks’ poor showing in Europe’s stress test has sparked protest from the Bank of Italy. But for reforming Prime Minister Matteo Renzi, shocks to the system aren’t unhelpful. He can use the mess to reform ailing lenders so they can support the shaky economy.
U.S. mortgages sputter on demand more than supply 23 Oct 2014 Plenty of home loans are available, industry data show. But a lukewarm economy has made potential borrowers skittish. With the likes of ex-Fed boss Bernanke complaining about getting turned down, blaming stingy banks is easy. It’s the other side of the equation that needs work.
EU bank tests: the good, the bad and the ugly 23 Oct 2014 The best European lenders will pass Sunday’s exercise outright based on their Dec. 31 balance sheet. Potentially some big names will fail that test, but pass on capital raised since. As for banks still deemed outright failures today, their bosses cannot expect to keep their jobs.
U.S. central bank can do without higher inflation 22 Oct 2014 One regional Fed boss worries CPI is below the institution’s 2 pct target. Yet EU-like deflation fears don’t travel. American prices are up an average of almost 2 pct a year since the crisis. And measures of future inflation expectations are still close to the target, too.
EU bank resolution pain fairer than it looks 22 Oct 2014 Large lenders in France face shouldering the biggest chunk of a new fund to resolve trouble-hit European banks. But the larger the contributions, the more clout their state has over deploying the funds. That should cut the chance of profligate banks in other states getting a free ride.
Hunt life lesson: Ideology and business don’t mix 22 Oct 2014 The right-wing beliefs of Nelson Hunt, dead at 88, colored his judgment on 1970s policies and led him to buy silver. An attempt to corner the market blew out when the Fed tightened money. Hunt’s failure showed why billionaire politics are best limited to funding candidates.
China’s capital defences have sprung a major leak 22 Oct 2014 Strict controls should shield China from flighty foreign capital. In practice, investors have snuck in at least $725 billion of short-term money since 2008. That makes the economy vulnerable to outflows. Central bankers are saddled with preventing a trickle becoming a flood.
Rob Cox: Fragility bigger worry than volatility 21 Oct 2014 Recent rollercoaster markets are a symptom of a more concerning malady. They reflect the shock accompanying recognition that widely accepted assumptions about everything from monetary policy to geopolitics, and even the state of global health, are dangerously flimsy.
ECB’s corporate bond plan is powerful but risky 21 Oct 2014 Forget QE: the European Central Bank may buy corporate bonds. The move could lower companies’ and governments’ borrowing costs and stimulate securitisation. It might also fuel moral hazard. But the central bank’s pledge to fight deflation would become more credible.