Rate cuts won’t revive India’s stalled growth 29 Jan 2013 The latest reduction in interest rates will be as futile as the previous one nine months ago. GDP growth will pick up when New Delhi curbs its own profligacy and improves the investment climate. The February budget may be the current government’s last chance to do both.
Carney should remember central banks’ limits 28 Jan 2013 Mark Carney, the incoming governor of the Bank of England, thinks the monetary authorities can do more to help the economy. His suggestion of targeting nominal GDP instead of inflation rates may be fashionable, but that policy is more likely to stoke inflation than growth.
Buoyant markets give ECB upper hand in Irish spat 28 Jan 2013 The European Central Bank has rejected a plan by Dublin to restructure its bank bailout. Any deal needs to balance the risks of derailing Ireland’s recovery against a breach of its own rules by the ECB. For now, low Irish bond yields give Frankfurt an advantage.
China FX swap may blur Bank of England mandate 28 Jan 2013 The central bank is under pressure to set up a swap facility with its Chinese counterpart. Doing so would boost renminbi trading in London. But the BoE’s main concern should be financial stability, not the City’s competitiveness. Confusing the two would be a mistake.
Colombia faces bigger threats than guerrillas 25 Jan 2013 FARC’s resumption of hostilities after a two-month ceasefire is disappointing. But peace talks continue. Colombia’s solid economic growth, though, is being infected by hot money from abroad distorting the currency and heading to the wrong sectors. That seems the greater worry.
ECB liquidity payback gamble was worth the risk 25 Jan 2013 EU banks have repaid over a quarter of the 489 bln euros of three-year central bank loans they took in 2011. The risk is weaker banks still hooked on cheap liquidity get stigmatised. But the stronger ones will benefit, and the euro zone has other options if the crisis reignites.
Draghi haunted by ghosts from Italian past 25 Jan 2013 The ECB president, who will soon be the euro zone’s top banking supervisor, has experience. He oversaw Italian banks when he ran the country’s central bank. Monte dei Paschi’s questionable deals happened under his watch. He has some explaining to do.
Bailout babies could give ECB target practice 22 Jan 2013 Ireland and Portugal are slowly regaining market access and may soon be able to ask the ECB to buy their debt. The bank would then have to put its money where its mouth is. But it could use the opportunity to show the benefits of its still-untested programme at a limited cost.
BOJ must now make its bold inflation goal credible 22 Jan 2013 By adopting an aggressive 2 pct target for annual price rises, Japan’s central bank has joined Prime Minister Abe’s war on deflation. The open-ended promise of asset-buying will help. The next challenge is to convince markets that policy won’t be reversed abruptly in future.
Which weapon will BOJ choose to slay deflation? 21 Jan 2013 Japan’s central bank is poised to transform itself into a hyper-unorthodox monetary warrior. Whether its new role is convincing or not will depend on its choice of a clever battle plan. The BOJ has a number of choices in its arsenal, but some are more lethal than others.
Gold move shows Buba can cave in to pressure 16 Jan 2013 Germany’s central bank will repatriate some of its gold reserves. That could mean that the institution famous for its indifference to outside criticism does listen to the wider world at times. It would be nice if it showed the same humility on more important matters as well.
Mervyn King exit may detoxify BoE/bank relations 16 Jan 2013 Lenders and their regulators shouldn’t be best buddies. But banks feel the outgoing governor’s recent vim partly reflects his previous mistakes. Mark Carney offers a clean slate. Given the Bank of England’s new structure could make it harder to manage, that’s just as well.
A how-to guide for Japan to escape deflation 10 Jan 2013 The nation’s new prime minister has promised to end falling prices. But raising the central bank’s inflation target may not suffice. Aiming for a sustained increase in the price level would be more credible. And a de facto currency peg may be better than more money-printing.
Fed quandary shows finance lost in economic space 7 Jan 2013 The U.S. central bank says it’s concerned about the economic costs of money-printing. That probably means inflation. They should worry more. Extraordinary policies have distorted asset prices. After providing misinformation for four years, markets risk becoming irrelevant.
Japan comes dangerously late to currency war 7 Jan 2013 Trash-talk from the world’s third-largest economy has pushed the yen down some 12 percent since September. But Japan is a Johnny-come-lately to the global contest to weaken currencies to support growth. Opening another front at this point only makes the contest more dangerous.
Egypt’s Brotherhood meets financial reality 7 Jan 2013 The fall of the pound creates inflationary pressure and capital controls underscore the shrinking of foreign reserves. Egypt’s ruling Brotherhood must finalise an unpopular deal with the IMF or risk a currency meltdown. Neither option is appealing ahead of elections.
Mario Draghi’s three challenges 28 Dec 2012 2012 was the year of the Dragon. Mario Draghi’s promise to buy bonds prevented a calamitous loss of confidence and brought stability to the zone. Next year he will have to deliver on that promise, and more besides.
Fed’s foreign bank crackdown is price of stability 20 Dec 2012 Forcing overseas lenders to properly capitalize their U.S. arms is necessary to protect the local - and global - financial system. The Federal Reserve’s unilateral approach could prompt others to follow suit. But fears that fragmentation will stifle global banking are overblown.
Bank of Japan needs new rules of engagement 20 Dec 2012 The central bank has agreed to print more money. But ending deflation requires it to adopt a government-mandated price target, and for lawmakers to boost its firepower. That need not undermine the BOJ’s independence, provided the new system is transparent and has legal sanctity.
Central bank independence at risk in 2013 17 Dec 2012 The Fed celebrates its centennial next year. In recent decades the independence of the U.S. lender of last resort and its peers elsewhere has become an article of faith. But with Western central bank balance sheets swelling toward 30 pct of GDP, that faith is far from rock solid.