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.
Fed politics may just preserve Fed’s independence 20 Sep 2013 Inadvertently, that may be the case. The president’s guy, Larry Summers, was torpedoed by Congress, suggesting political meddling. But if the Fed’s internal choice, Janet Yellen, gets the job, isn’t the central bank’s power maintained? It’s a messy way to the right outcome.
Raghuram Rajan wants to be India’s Paul Volcker 20 Sep 2013 Like the 1980s Fed chairman, India’s new central bank head wants to wring entrenched inflation out of a moribund economy. A surprise rate increase won’t win Rajan many friends. But he has sensibly retreated from his predecessor’s foolish plan to shore up the falling rupee.
Fed does to Europe what ECB, BoE couldn’t 19 Sep 2013 The U.S. central bank’s non-taper has done more for European money market rates in one day than the ECB and the Bank of England’s “forward guidance” policies did in weeks. Policymakers across Europe will be glad for the help, but it makes them look weak. That is a problem.
Bernanke is trapped by a discredited assumption 19 Sep 2013 The Fed chairman’s continued bond-buying pours fuel on market fires. The dire legacy of the last credit boom is yet to be overcome but Ben Bernanke still seems to believe he can ignore the dangerous side effects of easy money. He needs to embrace macro-prudential regulation.
Fed’s non-tapering amounts to bigger money-drop 18 Sep 2013 Despite an improving economy, the U.S. central bank stuck with buying $85 bln of bonds each month. With government borrowing needs and mortgage volumes down, Ben Bernanke is effectively increasing monetary stimulus. No wonder markets were taken pleasantly aback.
Markets aren’t pricing in new monetary order 18 Sep 2013 Even a modest reduction of Fed bond purchases would start the reversal of five years of extreme monetary policy. Investors may say they know what’s coming, but they will find the new financial world much less friendly - in both emerging and developed markets.
Summers fallout shows need for Fed clarity 16 Sep 2013 The putative front-runner to be the next chairman of the U.S. central bank has sparked global market swings just by withdrawing his name. Actual policy changes have even more impact. The Fed acts on domestic triggers, but it can still help the world by keeping its message consistent.
Latin America has more to fear than Fed itself 16 Sep 2013 Declining growth rates present the worst contagion problem. An interactive Breakingviews analysis suggests Venezuela and Brazil are most vulnerable, with Mexico and Argentina less so. The region’s politics and more homogenous profile than Asia leave it exposed in other ways.
Review: "Money for Nothing" sets crisis-film high 13 Sep 2013 A new documentary on the history of the Federal Reserve avoids many of the ideological traps that infect the current debate over the central bank’s critical role. Director Jim Bruce’s constructive approach also steers clear of the pitfalls of previous attempts to document 2008.
UK house prices need less rigging – not more 13 Sep 2013 Britain’s home valuers are rightly worried about a bubble, and suggest that annual growth of 5 pct should trigger a policy response. But if there’s a problem, the answer is to remove the props that are artificially inflating prices, not to set thresholds for applying the brakes.
Fed has to think global in its local QE unwind 5 Sep 2013 With G20 leaders meeting, India’s economist-prime minister wants the rich world’s reversal of monetary policy to be orderly and coordinated. But some at the U.S. central bank see its role as purely domestic. In reality, the wider impact should be a key factor in the Fed’s model.
Rajan’s call to diaspora can’t stem rupee rout 5 Sep 2013 India’s new monetary czar can lure some funds from overseas Indians with a cheap dollar-rupee swap. The clever and relatively cheap ploy may buy some time, but the former IMF chief economist will only succeed as a central banker if he can break the country’s painful stagflation.
Edward Hadas: Has quantitative easing worked? 4 Sep 2013 Almost five years of QE is enough for passing judgment. Post-crisis monetary policy could have been worse and it should have been better. Central bankers avoided disaster, but they tried to do too much with too few tools. From here, they need both bravery and realism.
Washington set to shake up autumn markets 3 Sep 2013 Lawmakers will soon return, most likely itching for another fight over the U.S. debt ceiling. Other market-sensitive policy is also brewing, notably the choice of a new leader for the Federal Reserve. Add in tinkering with housing, and investors need to brace for a turbulent fall.
Currency market’s rude wakeup call stirs Indonesia 29 Aug 2013 The collapsing rupiah has finally forced the country’s central bank to raise interest rates. It’s a step Jakarta should have taken much earlier. High inflation and a widening trade deficit have shown the country’s loose monetary policy for what it is: a risky growth obsession.