Fed can follow ECB, BoE on monetary tightrope 21 Mar 2023 Bank failures and high inflation complicate the US Federal Reserve’s interest rate decision on March 22. Its Western peers have shown how to fight rising prices while aiding financial stability. Taking the road more traveled would also ease traders' fears of new crises.
Where is Silicon Valley’s J. Pierpont Morgan? 17 Mar 2023 JPMorgan chief Jamie Dimon channeled his predecessor by corralling fellow bank CEOs to support First Republic. Financiers band together, even with regulators, when the going gets tough. Silicon Valley, more fragmented and libertarian, lacks such a savior. That could change.
US jobs data can spare Fed rate ratchet 10 Mar 2023 A larger-than-expected gain of 311,000 jobs might stoke inflation-fighters’ fears, but slowing wage growth and returning workers show a labor market in the sweet spot. That gives policymakers weighing further hikes in borrowing costs the opportunity to take a patient approach.
Powell leads markets on a needlessly wild ride 8 Mar 2023 Until February, investors believed the Federal Reserve chair would soon relax his fight against inflation. His Tuesday testimony to the US Senate has left them with the opposite impression. Just because Powell is prepared to bring out the big guns doesn’t mean he will have to.
Fed’s reluctance to go green will cost the Earth 7 Mar 2023 Unlike the European Central Bank, the U.S. Federal Reserve doesn’t want to fight climate change. That’s an expensive mistake. Global spending to hit net-zero emissions could reach $275 trillion by 2050. The Fed’s tools could reduce that price tag and curb future inflation.
“No landing” talk leaves stocks in no man’s land 6 Mar 2023 Bond investors worry that strong economic data will keep borrowing costs high. That’s pushed yields on 10-year German debt to an 11-year high. Yet buoyant equity markets are pricing in a dream scenario of faster growth and falling interest rates. They are in for a rude awakening.
How central banks got the inflation crisis wrong 14 Feb 2023 Western policymakers have hiked interest rates by more than 10 percentage points since 2021. Yet prices remain high. In this Exchange podcast, Paul Donovan, chief economist at UBS Global Wealth Management, explains how rate-setters failed and what they should do next.
How investors can profit from Fed-ECB divergence 7 Feb 2023 As America flirts with a recession, the U.S. central bank is set to stop tightening as interest rates near 5%. That will leave ECB President Christine Lagarde as the West’s most hawkish policymaker. The transatlantic split is an opportunity for traders who bet on European assets.
Markets gulp down central banks’ half-full glass 2 Feb 2023 Three of the world’s most prominent central banks raised interest rates to multi-year highs this week. Investors loved it, reading the decisions as the beginning of the end for monetary tightening. Policymakers, and stubborn inflation, might prove them wrong.
Fintech fight tests Fed’s transparency mission 19 Jan 2023 The Federal Reserve will soon disclose which firms it approves for valuable master accounts. It’s the latest in the central bank’s push toward greater transparency, but change has been slow. Fintechs seeking master accounts of their own will check the Fed’s sincerity.
Central bank schism is bad news for bunds 22 Dec 2022 Markets reckon the Federal Reserve will stop hiking rates before the European Central Bank. That has pushed yields on 10-year German bonds closer to those of U.S. Treasuries. The trend will last in 2023, as sticky euro zone prices and a fiscal splurge pressure Berlin’s debt.
Central bankers will shift inflation goalposts 19 Dec 2022 The Federal Reserve, ECB and others insist they’re determined to get price increases back down to 2% a year. Though the target is arbitrary, changing it is tricky. But stubborn inflation means monetary authorities will have to find ways to tolerate rising prices for longer.
Lack of trust leaves markets at odds with the Fed 14 Dec 2022 The Federal Reserve rankled investors this year after it misjudged inflation. Markets have since ignored the central bank’s comments and bet on rate cuts in 2023. Yet the Fed continues to say it will hold rates high. The longer the two disagree, the more investors stand to lose.
Bank of England inflation fight easier than Fed’s 24 Nov 2022 An OECD study shows supply shocks are pushing up American prices, while strong demand is a bigger factor in the UK. That makes BoE Governor Andrew Bailey’s task more straightforward than Fed Chair Jerome Powell’s. For Britain, though, price stability will deepen economic woes.
Capital Calls: Fuzzy Fedspeak, Dr. Martens 24 Nov 2022 Concise views on global finance: The U.S. central bank has left traders guessing the meaning of the word “various”; shares in the recently listed British bootmaker fell 20% after sales missed expectations, and a warning that its investment needs will hurt profitability.
Fed gets credit for providing perpetual angst 8 Nov 2022 Investors in Asia are overreacting after a South Korean issuer flipflopped on a decision to exercise a call option on a $500 mln bond. Liquidity measures from Seoul eased an earlier rout but pressure from U.S. rate hikes is turning boring corners of finance into something hot.
Bernanke bank-crisis Nobel requires markets sequel 10 Oct 2022 The former Fed chair and two fellow economists won the prize for showing how lenders can fail and cause a depression. Bernanke put theory into practice in 2008, averting a slump. But ultra-low interest rates built up financial risks which are only now becoming fully apparent.
Fed makes inflation fight Joe Biden’s problem 21 Sep 2022 The central bank raised rates by 75-basis-points and suggested they could go higher than expected without a hard landing. That seems overly rosy. But inflation could do more harm than a recession – and if the Fed overshoots, it’s the man in the White House that carries the can.
Powell gives markets tough medicine they needed 26 Aug 2022 The Fed chair’s Jackson Hole speech came with a blunt message: The U.S. central bank will tame inflation by hook or by crook. That’s a dose of reality for investors searching for dovishness. It’s convincing households and businesses that really matters now.
Powell’s inflationary wrong could turn out right 25 Aug 2022 The Fed chief’s upcoming speech at Jackson Hole may skew hawkish, to make up for him dismissing rising prices too readily at last year’s confab. His mistake, though, protected the U.S. economy from rate hikes that would have hurt growth. By being late, the Fed may do less harm.