Edward Hadas: Small is beautiful in finance 6 Nov 2013 Mark Carney is wrong to say a vibrant financial sector brings substantial benefits. Finance is a cost, not a component, of prosperity – so less is usually better than more. The new Bank of England governor would be wiser to call for a more efficient sector.
Hugo Dixon: ECB really must act on deflation 4 Nov 2013 With the euro near a two-year high, the unemployment rate at 12.2 pct and inflation at 0.7 pct, the case for looser monetary policy should be clear. The question is what tools to use: lower interest rates, another LTRO or the ECB’s first dose of QE. A mixture is the answer.
Federal Reserve is now just waiting for Godot 30 Oct 2013 In somewhat absurdist fashion, the central bank will keep buying $85 bln of bonds each month without any clear idea of when to stop or obvious evidence the year-old program is helping the economy. The recovery isn’t apt to accelerate soon. Taper expectations may be in vain.
Hugo Dixon: The City has huge scope to expand 28 Oct 2013 Finance has rightly been in the sin bin for the last six years. And the cleanup job isn’t finished. But Mark Carney, the new Bank of England governor, is correct to stress that a vibrant City is good for Britain, Europe and the world – provided it’s properly organised.
Chances of big banking going boring sped by Fed 25 Oct 2013 The central bank and other U.S. watchdogs want American lenders’ liquidity buffers to be safer and in place more quickly than international rules demand. This is likely to hit banks’ bottom lines and dissuade others from bulking up. It’s a smart way to foster financial stability.
Carney shows touching faith in financial regulation 25 Oct 2013 The Bank of England governor’s broadly sensible new liquidity regime is part of an “open for business” approach to banking. But if the UK prospers as a global financial hub, it will be tied to a volatile sector. And Carney may overestimate the ability to deal with crises.
Weak dollar stress-tests the ECB’s toolkit 25 Oct 2013 The euro has gained 8 percent versus the U.S. currency since early July. The ECB’s official line is that the exchange rate isn’t a target. But the tightening of financing conditions in the euro zone is a source of concern – and the ECB has limited tools to address the situation.
ECB’s bank review balances pragmatism and pain 23 Oct 2013 The central bank’s template for its assessment of euro zone banks’ finances looks robust inasmuch as it will help harmonise opaque and disparate balance sheets. It’s not that strenuous on capital buffers – which takes sting out of the question of who will fill the holes.
Blueprint for new BoE could start with rebrand 22 Oct 2013 The Bank of England has hired McKinsey and Deloitte to review strategy and operations. It’s a chance for the 319-year-old institution to review its KPIs to better leverage its USP and remotivate its key stakeholders.
At last, central bank candour on property bubbles 22 Oct 2013 The Bundesbank says apartment prices in some German cities could be 20 pct overvalued. Policymakers usually avoid such blatant views on prices, saying distortions aren’t their problem unless leverage is a factor. That’s too narrow: central banks have a role as market critics.
Take M&A out of the financial crisis toolkit now 21 Oct 2013 JPMorgan and BofA are paying billions in settlements related to failed deals that were actively encouraged by regulators. The “supervisory acquisition” was a trusty instrument for decades. Not anymore, though. Watchdogs better hope their other new mechanisms work as planned.
De-Americanized world economy is a long way off 18 Oct 2013 China this week railed at Uncle Sam’s influence. Political brinkmanship over U.S. borrowing rattled markets, and the global impact of Fed policy is another worry. American hegemony won’t fade quickly, but officials elsewhere can join Washington lawmakers in speeding the process.
Accommodating Fed puts bond vigilantes out of work 18 Oct 2013 Those who took America to the brink of default may well do it again in early 2014. Investors expect the Fed to mitigate economic damage inflicted by the showdown and are buying Treasuries. As long as the central bank keeps obliging, bond markets won’t discipline politicians.
New ECB liquidity splurge couldn’t please them all 17 Oct 2013 Markets are gearing up for another liquidity injection by the ECB, as the past years’ extraordinary measures expire. The aims could include suppressing rates, channelling funding to small companies and reinforcing the ECB’s forward guidance. That leaves room for disappointment.
Brazil rate hikes keep pulling wrong lever 10 Oct 2013 The central bank jacked up the Selic for the fifth time since April, to 9.5 pct. With inflation below 6 pct, it punishes businesses and the country’s weakening budget. Meanwhile, the state development bank is draining resources. Brazil’s main problem isn’t monetary but fiscal.
Yellen’s Fed hopes sound like wishful thinking 10 Oct 2013 The next head of the U.S. central bank says more needs to be done to strengthen the recovery. Fine, but the Fed can’t work magic. There are times when monetary policy creates jobs. It’s doubtful this is one of them. The Fed’s regulatory remit deserves more urgent attention.
There’s no preparation for debt-ceiling collapse 4 Oct 2013 A U.S. default could unleash global financial panic. Non-payment almost certainly won’t happen, because neither the Fed nor the nation’s creditors want to try out Lehman-to-the-power-of-10. Which is good, because portfolios cannot be trimmed to risk-manage Armageddon.
Dangerous Fed roulette rules global markets 25 Sep 2013 Central bankers claim to be predictable, so investors can see what’s coming. But last week’s surprise from the Fed showed the real rules. Markets look more like roulette, with the Fed spinning its unpredictable policy wheel - while distorting them with its printed chips.
ECB crisis loans worked. Now for the hard part 24 Sep 2013 Banks are slowly but surely repaying the ECB’s crisis loans. It’s a good sign but there is a snag - money market conditions will tighten further if too much is repaid too quickly. That’s the last thing the central bank wants. It must decide soon how, and when, to react.
Hugo Dixon: Euro zone needs anti-boom activism 23 Sep 2013 The ECB’s plan to keep interest rates low for an extended period could ultimately fuel booms in countries such as Germany. That’s the problem with a one-size-fits-all monetary policy. The solution is for countries threatened by booms to pursue vigorous counter-cyclical policies.