Treasury’s borrowing boom is gust before the storm 1 Nov 2023 Between the Federal Reserve’s interest-rate pause and the US government’s $112 bln borrowing splurge, there’s plenty to drive yields higher. But the reason Treasury markets are so susceptible to turbulence is the bigger problem: too much debt, and no plan to get it down.
Fed clarity effectively sends a strong buy signal 20 Sep 2023 Benchmark US interest rates probably will hover around 5.5% for a while. A stable cost of capital gives companies, consumers and investors good reason to stop putting off decisions any longer. It should help resolve valuation ambiguities and restart M&A, IPO and housing activity.
Bond rout will amplify Powell’s Jackson Hole words 23 Aug 2023 Yields on 10-year US debt are near a 16-year-high. That’s lifting borrowing costs even though the Federal Reserve is likely done with raising rates. More expensive loans may cause a recession. When he speaks on Friday, the Fed chair needs to calm markets without caving into them.
Inflation dip puts central bankers in a pickle 27 Jul 2023 The Federal Reserve and ECB once again hiked interest rates. Yet US price rises are easing with few signs of economic pain. In this Viewsroom podcast, Breakingviews columnists discuss how this phenomenon, dubbed ‘immaculate disinflation’, complicates what policymakers do next.
Peak US interest rates will weaken dollar quicker 26 Jul 2023 The Fed’s latest hike should be the last, based on how investors are trading. Higher inflation elsewhere and slower increases by other monetary authorities suggest divergent policies will persist. Similar conditions that turbocharged the greenback are set to reverse thrust.
‘Immaculate disinflation’ places Fed in purgatory 25 Jul 2023 Inflation is falling towards the US central bank’s 2% target without a recession or job losses. History and economic theory suggested such a feat was impossible. Doubts over conventional thinking leave policymakers in a bind over the next stage of their fight to rein in prices.
Higher rates encourage more picking at carcasses 10 Jul 2023 SVB Financial is suing regulators to recoup $1.9 bln in cash. The sum would generate $100 mln in interest, four times what it would have earned a year ago. Without that, SVB may need pricier rescue funds. Higher rates make cash worth a fight, especially at failed companies.
Why central banks cannot relax in inflation fight 4 Jul 2023 Western policymakers have frantically hiked interest rates to dampen consumer prices. In this Exchange podcast, Claudio Borio, a top official at the Bank for International Settlements, argues that rate-setters need to keep going to ensure costs of living won’t stay elevated.
US banks gird for dose of post-stress-test trauma 29 Jun 2023 Big lenders breezed through their annual examinations but will soon be walloped with new rules that could force them to hold one-fifth more capital. Some of that looks like overkill. But watchdogs bruised by recent bank failures may see that as a feature, not a bug.
Fed’s pause is now easier to extend 14 Jun 2023 Chair Jerome Powell’s rate-setting crew snapped its long streak of hikes. With the banking crisis stabilized, the FOMC can refocus on prices. Inflation persists, but is moving in the right direction, and there’s less reason to hew to investors expecting a fresh increase in July.
Fed’s rate hike habit will be hard to kick 13 Jun 2023 The US central bank is mulling a pause after raising interest rates at its last 10 meetings. In this Exchange podcast, Morgan Stanley chief economist Seth Carpenter lays out the calculus behind the Federal Reserve’s next move, and why it’s so hard for policymakers to pivot.
Fork in rates road forces markets to get picky 9 Jun 2023 While the US Federal Reserve looks to halt monetary tightening, other central banks are still hiking. That ends a year-long trend of borrowing costs climbing in sync. As policymakers’ plans diverge, traders will need to work out each economy’s separate path and bet accordingly.
Fed’s SVB review finds there’s no “I” in “blame” 28 Apr 2023 Its postmortem of the collapse of SVB Bank calls out timid supervisors, loopholes that made it hard to keep tabs on fast-growing firms and previous vice chair Randal Quarles’ push to cut red tape. The result is a prescription for lots of change, but not much accountability.
Dollar bulls are praying for a mild downturn 26 Apr 2023 The greenback has lost 14% versus the euro since September, as investors bet on Europe’s recovery and China’s reopening. Inflation and interest rate trends still favour the single currency. The best hope for the buck is a minor economic slowdown to boost its safe haven status.
Fed can find inflation silver lining in bank storm 14 Apr 2023 Financial turmoil has prompted lenders to tighten the purse strings. That helps the Federal Reserve to cool the economy but might starve firms of funds. The central bank can spend up to $3 trln to combat a credit crunch without lifting consumer prices. It may need a lot less.
Central bank pilots risk leaving cockpit too soon 14 Apr 2023 Western policymakers at the IMF Spring Meetings hinted that their mission to slay inflation without a recession is nearly accomplished. Investors agree, and hope for rate cuts. That’s overdone. A soft landing is in sight, but so too is the danger of complacency.
A top tip for central banks: talk less, smile more 11 Apr 2023 Investors’ obsession with policymakers’ hints about future interest rate movements is fueling market volatility. As bank failures and inflation upend forecasts, officials can take a more muted approach. It will help them steer the economy without disturbing financial stability.
Powell is leader of the free world – for now 28 Mar 2023 The Federal Reserve chair has ever-larger powers and responsibilities. If he raises rates, he could spark a banking crisis and complicate Joe Biden’s re-election bid. If he lets up, prices will stay high. Powell may stay the course, but Biden isn’t going to like it.
Market nerves tie US rate-setters’ hands 22 Mar 2023 The Federal Reserve's quarter-point rate hike was the best it could do without creating other issues. Higher rates put more stress on banks, but investors expected such a move. Chair Jay Powell might not like following behind markets, but nor can he afford to surprise them.
Fed’s self-scrutiny starts off on the wrong foot 22 Mar 2023 Supervisory tsar Michael Barr is leading a probe into Silicon Valley Bank’s collapse. But the Federal Reserve’s tangled, partly centralized structure makes it ill-suited to conduct a warts-and-all review of its supervision. Banks don’t police themselves; the Fed shouldn’t either.