Economic slack gives Bailey cover to cut rates 31 Jan 2024 The market wants the Bank of England to lower borrowing costs soon. Governor Andrew Bailey is set to keep them steady on Thursday because inflation remains high. Yet sub-par economic performance in the next few years could pave the way for easier monetary policy from May.
Close the Volcker playbook and open Greenspan’s 30 Jan 2024 Fed Chair Jay Powell wisely embraced Paul Volcker’s inflation-fighting approach from the early 1980s and quickly raised borrowing costs. With price pressures abating, it’s time to change tactics. Leaning into Alan Greenspan’s tactical 1995 interest rate cuts makes more sense now.
Revamp of the world order will have to wait 29 Jan 2024 Developing countries last week called for a rethink of global governance. While it’s possible to imagine an order more conducive to peace, justice and prosperity, the chances of creating it are slim. Better to shore up the existing multilateral system and wait for better times.
ECB is battling an imaginary wage spiral 24 Jan 2024 European Central Bank President Christine Lagarde is set to hold rates this week because she fears rising salaries will boost inflation. Yet euro zone workers are getting raises of just 3.8%, down from a year ago. Frankfurt may not want to cheer bigger pay, but it can ignore it.
Four-day week is clever fix to economic malaise 24 Jan 2024 Companies including EssilorLuxottica and Panasonic are experimenting with shorter working weeks. Pilot schemes have led to revenue increases, declines in burnout rates and lower churn. It’s an anti-inflationary way to keep staff happy and give them free time to consume more.
Fixed income investors have reasons to be fearful 23 Jan 2024 Uncertainty over the direction of inflation and monetary policy is buffeting markets. In this Exchange podcast Jim Grant, founder of ‘Grant’s Interest Rate Observer’, discusses his gloomy outlook for US bonds and sounds a warning about the risks of shadow banking.
Fractured world is changing investment geography 23 Jan 2024 Washington and Beijing’s quasi-Cold War, and rising protectionism, are already hurting foreign direct investment. Though some states are gaining from China’s falling FDI, overall cross-border flows are down. If Trump becomes US president, they will take another hit.
Strong yuan, not stock market, tops Xi’s wish list 23 Jan 2024 The State Council pledges it will promote a stable capital market. Yet Beijing is showing more urgency in supporting the yuan, weakened by foreign selling. A strong currency is central to President Xi Jinping’s goal to make China a financial power. A strong stock market can wait.
It will take more than Draghi to boost EU growth 22 Jan 2024 Europe can’t decide if it will be more competitive with open markets or heavily protected national champions, and it wants Mario Draghi to pick. Italy’s former PM is more likely to reflect than resolve tensions among members. But the bloc can’t up its game behind closed doors.
Davos holds up funhouse mirror to shifting world 22 Jan 2024 Delegates from the Middle East and India made a splash at last week’s World Economic Forum, reflecting their wealth and investment appeal. Europeans and Chinese were subdued. Big Tech looks the winner from AI. This year’s Swiss conflab arguably exaggerated more than it distorted.
Private credit gets the slice-and-dice treatment 19 Jan 2024 Managers like Blackstone and Blue Owl are selling ‘collateralised loan obligations’ backed by privately issued debt. Such alchemy, common in traditional lending, helps lenders raise cheap funds. It also adds complexity, and makes private credit more dependent on flighty markets.
Carbon markets have a long shot at redemption 18 Jan 2024 The US hopes to raise over $200 bln using carbon credits to help emerging markets cut emissions. The idea of enabling firms to offset pollution with cuts elsewhere has long been flawed. Washington’s wager is that a lack of green cash for developing states is a bigger evil.
BoE can win inflation race but lag on rate cuts 17 Jan 2024 UK price growth could drop in the spring due to lower energy bills, enabling the Bank of England to hit its 2% target before the US and Europe. But wage and services inflation will stop Governor Andrew Bailey from reducing borrowing costs. So will a likely UK fiscal splurge.
China consumers keep Beijing, and world, on edge 17 Jan 2024 The economy expanded 5.2% last quarter, thanks to manufacturing. But local demand remains weak, forcing factories to look abroad. That will stoke global trade tensions and add to fears that China will export deflation. All eyes are on how Beijing stimulates domestic consumption.
Economics is pushing US swing voters to pick Trump 16 Jan 2024 The real estate mogul won the Iowa caucus, the first Republican primary in the presidential race. The midwestern state is not a battleground, but hotly contested areas favor him over President Joe Biden. That may be because their residents feel poorer than four years ago.
Capital Calls: Greek airport IPO 16 Jan 2024 Concise views on global finance: State-backed Athens International Airport may be able to fetch a 3 bln euro valuation in a planned February listing.
Reparation bonds could unlock $300 bln for Ukraine 15 Jan 2024 The US and EU are struggling to keep writing mega cheques to Kyiv and reluctant to hand over frozen Russian central bank assets. One alternative is for Ukraine to sell bonds backed by future claims for reparations. It could then use the cash to defend itself against Moscow.
Taiwan navigates new waters with old map 15 Jan 2024 Lai Ching-te has won his independence-leaning party an unprecedented third term. That tees up a deterioration in the island’s relationship with China and will refocus global minds on the costs of a possible confrontation. It puts pressure on Lai to find new ways to minimise risks.
BoE can counter banks’ unfriendly rate fire 12 Jan 2024 UK lenders like HSBC think lower borrowing costs are coming and have slashed five-year mortgage payments below 4%. That makes it harder for the Bank of England to slay inflation and, in fact, may delay any cuts. Governor Andrew Bailey could ask the City to reward savers as well.
The spectre of Donald Trump hangs over Davos 12 Jan 2024 The former US president is not among the 2,800 business and political leaders converging on the Swiss resort. But his possible return to power will pervade debates about Ukraine, China, and climate change. In 2016, Davos laughed off the idea of a Trump presidency. Not this time.