QE-driven markets should fear good news 10 May 2013 Relentless quantitative easing is driving markets to extremes. Central banks want more GDP growth, but they also get high oil prices, hurting consumers. They also get markets which rely on more money - and which could tumble when a stronger economy ends the QE binge.
ECB sticks to caution with minimum rate cut 2 May 2013 The euro zone’s central bank did as little as expected, a 25 basis point drop in its main rate, to 0.5 percent. A lack of unanimity suggests it won’t cut more soon, or start any bold initiatives. The ECB looks too divided to wage a tougher fight against a sinking economy.
Fed running risk of re-inflating bubbles 1 May 2013 The U.S. central bank is sticking with loose monetary policy and hefty asset purchases. But with stocks at record levels and home prices up 9.4 pct in a year, asset values are heading higher even if growth isn’t. The Fed needs to counter bubbles as well as economic sluggishness.
Get ready for three-digit gold 26 Apr 2013 Bullion’s recent bounce doesn’t mean investor demand has returned. And gold remains expensive for jewellery buyers, whose interest has been weak since 2009. Central bank purchases will offer some support. But in a one-sided market, gold could fall below $1,000.
BOJ’s Greek role model: Delphi or Odysseus? 25 Apr 2013 The Bank of Japan may raise its inflation forecast closer to its 2 percent goal. But wrong prophecies can bring discredit. Rather than trying to be Delphi’s oracle, the BOJ could mimic the Greek hero by tying its hands until the temptation to tighten policy too soon has passed.
UK lending superchargers may still misfire 24 Apr 2013 The Bank of England’s reworked Funding for Lending Scheme may finally be aimed at the right target: credit-starved small firms. Yet if the companies don’t want to borrow, it still won’t work. And it looks too easy for FLS cash to leach out into less deserving sectors.
Brazil boxes itself into corner on growth 18 Apr 2013 The central bank just raised interest rates to fight inflation. GDP expansion, meanwhile, is already stalling. High public spending and rapid private credit growth, the fuels for Brazil’s boom, are both reaching their limits. President Rousseff may be running out of options.
BOJ adds to global financial tidal wave 15 Apr 2013 Like most of its major peers, the Japanese central bank has plausible domestic reasons for joining the global contest to pour the most money into the financial system. But with Japan now in the game, reversing the money flood will prove even more of a challenge.
Ten ways to tell whether Abenomics is working 15 Apr 2013 Shinzo Abe is a man in a hurry. Japan’s new prime minister wants to pull the economy out of its deflationary hole with aggressive fiscal and monetary easing. But is his plan working? Breakingviews’ new index allows you to combine ten indicators to track the progress of Abenomics.
ECB’s plan for small companies lacks pizzazz 12 Apr 2013 The central bank has outlined concrete proposals to address the credit drought hitting small businesses in the euro zone. Cutting capital requirements and smoothing the path to a proper SME securitisation market makes sense. The snag is that it still might not make banks lend.
ECB’s 360 degree SME pledge goes round in circles 9 Apr 2013 Mario Draghi has promised to consider all options to help small companies in Europe but his options are limited by the bank’s mandate and politics. Using third parties such as national central banks isn’t a panacea. The most the ECB can do is ease SME funding woes.
Inflation fear shouldn’t constrain monetary policy 9 Apr 2013 Central banks have more room to manoeuvre than inflation hawks think. Even temporarily excessive economic stimulus is unlikely to derail price stability, as a new IMF analysis suggests. Monetary policymakers should use this leeway - especially in the euro zone.
ECB can count itself lucky among central banks 8 Apr 2013 Too much is expected of the monetary authorities in Tokyo, Washington and London. They are supposed to kick-start growth and reduce unemployment. That’s wishful thinking. In Frankfurt, the hope is more realistic: just keep the single currency together.
Review: The Robespierres of central banking 5 Apr 2013 Ben Bernanke, Mervyn King and Jean-Claude Trichet turned central banking theory on its head in their efforts to fight the crisis, says Neil Irwin. Central bankers have become both more powerful and less independent in the process. Peace may have been preserved, but at what cost?
Kuroda does what he can for BOJ’s inflation goal 4 Apr 2013 Japan’s new central bank chief has launched his country’s most audacious bid to end deflation. The BOJ will print enough money to double the size of its balance sheet in just in two years. That improves the odds of hitting the 2 percent inflation target.
Hugo Dixon: Cyprus leaves banking union up in air 1 Apr 2013 Optimists hope the fiasco will provide the euro zone with the impetus to complete its banking union. But it is also possible that core countries will now be even more reluctant to absorb the liabilities of bust peripheral banks. Fortunately, there’s a way of squaring the circle.
Cypriot banks’ liquidity lifeline becomes a noose 28 Mar 2013 Laiki’s 9 bln euros of emergency liquidity assistance from the Cypriot central bank kept it afloat before the bank’s winding down. Now it has been dumped on rival Bank of Cyprus. The island state is learning the hard way that ELA is a liability for the government, not the ECB.
ECB will have to bankroll new era for euro banks 28 Mar 2013 Credit spreads have jumped on the belief that Cyprus will be a template for resolving bust banks. The threat of bailing in senior creditors makes for safer banks and fewer taxpayer-funded bailouts. For now, it worsens life for weak banks. And that means more work for the ECB.
ECB’s street-cred faces another hit over Cyprus 25 Mar 2013 The European Central Bank has pledged to fund the Bank of Cyprus if deposits flee. The Cyprus lender can probably comply with existing rules; capital controls look unnecessary. The bad news? Yet again, the ECB would be granting “exceptional” funding for longer than it should.
Hugo Dixon: Cyprus must avoid capital controls 24 Mar 2013 Imposing them wouldn’t just be terrible for Cyprus. It would be a historic error that could even spell the beginning of the end of the single currency. The ECB must instead stand ready to supply banks with unlimited liquidity and fund a run, provided Nicosia cuts a bailout deal.