Hugo Dixon: Bernanke deserves 6 out of 10 27 Jan 2014 The retiring Fed chairman failed to predict the financial crisis and was initially slow to react when it hit. But after Lehman Brothers went bust, he pulled out the stops to save the financial system and pep up the U.S. economy. On balance, the rest of the world can be grateful.
Further policy reversal is Argentina’s best option 24 Jan 2014 Cristina Fernandez has eased FX curbs. That’s a step toward tackling the peso plunge. But on official statistics, there shouldn’t be a currency problem. Argentina needs more reform, spending cuts and an independent central bank – plus better data. That means a whole new mindset.
UK’s guidance flop means markets must think again 24 Jan 2014 Mark Carney signalled the early end of a policy that was designed to keep market rates down but actually pushed them up. The shift after a mere five months is embarrassing for the central bank governor, but makes sense. Investors have become too confident that rates will rise soon.
Swiss housing bubble-poppers are bolder than UK’s 23 Jan 2014 Switzerland’s central bank has intervened for the second time in a year to check house price inflation. Mortgage stocks are growing quicker than in the UK. But the Swiss regulator’s willingness to deploy macro-prudential tools is at odds with British inactivity.
Turkey’s crisis is beyond central bank’s control 23 Jan 2014 After refusing to hike rates, the central bank is intervening in forex markets to try to stem the lira’s freefall. But Turkey’s problems require more drastic action. The economy’s structural faults and the ruling party’s erratic behaviour are at the heart of investors’ worries.
Bank of England gets ready to forget unemployment 22 Jan 2014 The market takes the UK central bank at its 2013 word - tumbling UK unemployment will fairly soon lead to higher rates. Sterling and gilt yields are up. But the BoE’s minutes suggest joblessness was last year’s story. As long as inflation stays low, rates will too.
Money market starts to tell ECB to ease 20 Jan 2014 There have been some sudden odd jumps in rates in the euro zone short-term interbank market. A few scattered spikes won’t bother the central bank, but too much tension would boost borrowing costs in the real economy. To counter that, the ECB would be tempted to loosen policy.
Euro QE puzzle misses French and Italian pieces 16 Jan 2014 Mario Draghi’s dovish stance has raised hopes the European Central Bank could launch asset purchases. Europe’s fragmented money markets and weak lending mean the payoff could be significant. But it can only be done if France and Italy embrace reform.
Obama strikes right equilibrium with new Fed board 10 Jan 2014 The U.S. president formally tapped Stan Fischer and Lael Brainard, bringing crisis experience, global perspective and gender balance to the central bank. Renewing Jay Powell’s term makes the package palatable for Republicans. That leaves one vacancy, ideally for a regulator type.
Carney shouldn’t shift BoE’s guidance goalposts 10 Jan 2014 The Bank of England Governor has a nice little problem. His forward guidance, based on a 7 percent unemployment rate, might seem to suggest a rate hike. Shift the goalpost? But goalposts that shift lose their credibility. And a move would dangerously reduce policy flexibility.
Britain will be first rich country to raise rates 9 Jan 2014 The UK has a large trade deficit, falling unemployment and a frothy housing market. As the economy picks up, inflation could return. Bank of England Governor Mark Carney wants to keep rates low for a long time. Facts will force him to change his mind.
Draghi is playing with fire on deflation risk 8 Jan 2014 Euro zone inflation remains at a worryingly low rate, with some countries at risk of falling into debilitating deflation. The ECB shouldn’t consider only the whole zone. Nor should the central bank let German opposition hold it back. It should act now, before it’s too late.
Monetary policy similarity outweighs divergence 6 Jan 2014 It looks like monetary policy is splintering around the world. The Fed will taper, while the ECB may have to add stimulus. Japan and the UK plan to stay where they are. But the variations hide a greater similarity: they are all still trying to push up growth with easy money.
China’s hard-pressed central bankers get a B+ 24 Dec 2013 A funding squeeze in the interbank market has been treated with an injection of cash. The real economy is unlikely to notice any difference. The central bank is still passing its basic test of keeping China’s monetary system stable, but no longer with flying colours.
Carney will struggle to sustain BoE governorship 23 Dec 2013 The UK’s central bank chief is a vulnerable hostage to fortune. The Canadian thinks the British economy will enjoy economic recovery with low inflation and no housing market mess. If he’s right, he’ll be fine. If he’s wrong, Carney will find himself friendless.
Markets quaff perfectly mixed punch 19 Dec 2013 It sounds like a paradox: stocks go up when the Fed takes some money away. But investors have figured out that central bankers see economies which are strong enough to provide profit growth but too weak for serious tightening. The party could last until inflation reappears.
100 years of Fed competence led to cursed workload 17 Dec 2013 After humble beginnings, lawmakers heaped more and more responsibility on the U.S. central bank. Though it hasn’t always been perfect, its increasing power came from screwing up least. But some worry those many mandates may become too much to manage – if they aren’t already.
Asmussen’s ECB exit will hurt Draghi 16 Dec 2013 Mario Draghi will lose an ally when ECB board member Jorg Asmussen quits to join Germany’s new government. The central bank boss will miss Asmussen’s loyal support - against German hostility, including from Bundesbank chief Jens Weidmann. Draghi may become more timid.
Hugo Dixon: Europe’s post-crisis challenge 16 Dec 2013 The hot phase of the euro crisis may be over. But the zone will limp on for years with low growth and high unemployment unless further action is taken on three fronts: bank balance sheets must be cleaned up, monetary policy loosened and more free-market reforms adopted.
There’s method in ECB sovereign debt muddle 12 Dec 2013 President Mario Draghi seemed to contradict ECB executive board member Peter Praet by hinting he’s not about to demand capital against euro zone banks’ sovereign debt. Investors can expect more mixed messages. It’s hard to gee up lending while trying to become a tough regulator.