Clever Bundesbank recruits labour as a policy tool 21 Jul 2014 Even in thriving Germany, no one has figured out how to push up wages enough to reverse disinflationary pressure. The central bank is trying something new: encouraging unions to fight harder for pay rises. It may have enough authority to incite some healthy inflation.
BoE doves look an endangered species 16 Jul 2014 UK unemployment is falling and inflation has rebounded towards the Bank of England’s 2 percent target. Any policymakers who are opposed to an early rate rise can point to the persistent and puzzling weakness of wage growth. But the cards are increasingly stacked against them.
Don’t believe predictions of low interest rates 9 Jul 2014 Central bankers and economists say the official cost of money in the post-zero rate era will remain cheap by historic standards. Their prognostications rely on a theory which is unsound, unsupported by evidence and impossible to apply. Future rates are as likely to be high as low.
Hugo Dixon: Matteo Renzi is on a roll 7 Jul 2014 The Italian prime minister is a brilliant politician. His youthful dynamism has bought him time with his people, the markets and the EU to carry out the immense job of reforming Italy. But he has yet to show he can execute. He now needs to, because even his time will run out.
ECB’s targeted loans look deliberately scattergun 3 Jul 2014 The European Central Bank has explained how banks must lend to get super-cheap funding. The terms are loose, and there’s little to ensure the cash will reach credit-starved SMEs. But that merely makes the loans more attractive - and thus a more powerful weapon against deflation.
Europe challenged by inadequate private investment 3 Jul 2014 The euro zone economy might benefit if governments invested more, but a new study shows that weak spending by companies has been a bigger drag on growth. The problem is much easier to diagnose than to cure. Special lending programmes and tax breaks might help.
Renzi picks wrong energy policy for right reasons 30 Jun 2014 The Italian prime minister has a Machiavellian streak. Matteo Renzi’s move to cut renewable energy incentives could spook investors, but it may help his reform agenda. He now needs to prove that the end justifies the means.
UK’s hawkish shift is dangerous 30 Jun 2014 There are good reasons for the Bank of England to raise rates. But an early move this year could be costly. Sterling would rise further. Exports, already struggling, would suffer. Rebalancing dreams would die. The BoE must hope the housing market cools, and the Fed quickens.
EU can move forward after unneeded Juncker drama 27 Jun 2014 The UK-created conflict on the appointment of the former Luxembourg PM as European Council president is coming to an end. Europe’s leaders now have to sort out the somewhat confusing British demands for change. Once that is done, there will be room for compromise.
Spain’s tax reform misses most goals 27 Jun 2014 The reform of Spain’s tax system was supposed to make it more efficient, help boost growth and make companies more competitive. Instead, its effect on growth looks minimal and it will have an adverse impact on public finances.
Barclays’ hit reflects investment bank fears 26 Jun 2014 Shares in the UK bank tanked 9 pct after accusations of fraud in its “dark pool.” That implies a surprisingly big $6 bln hit. Fine inflation is rampant, and Barclays could suffer reputational damage. It’s a reminder: small investment banking businesses can carry outsized risks.
Carney takes narrow view of financial stability 26 Jun 2014 The Bank of England governor had a chance to address galloping UK house prices via macroprudential tools, curbs to UK mortgage guarantee schemes, and dire warnings. All he offered was underwhelming lending rules. That is no way to protect banks in the long run.
Skeptics have best of U.S. Ex-Im Bank fuzzy math 26 Jun 2014 Depending who’s talking, the export lender costs taxpayers $2 bln or earns $2 bln, is essential or aids just 2 pct of exports, and helps mainly Boeing or predominantly small businesses. Ex-Im is a political football more than a linchpin of trade, and its critics have the edge.
Russian rally has deceptive momentum 24 Jun 2014 Moscow stocks have recouped this year’s losses as Vladimir Putin sends signals of a more conciliatory policy toward Ukraine. The annexation of Crimea is fading from investors’ memory. But Russia still has its problems, which limit its scope to outshine other emerging markets.
Sex-trade spat exposes defect in morality-free GDP 19 Jun 2014 France is refusing to include involuntary prostitution in its measure of national output. The stance runs contrary to new European standards. It also exposes the problem with economists’ conviction that GDP can be ethically neutral. France is right. GDP purists are wrong.
Europe can learn from limits of Japanese reform 19 Jun 2014 Abenomics is not failing, but it is proving more incremental than revolutionary. That is not surprising. It is very hard to change embedded practices in rich and ageing countries. Europeans have different problems from Japan, but these are likely to prove equally persistent.
UK’s duff credit easing is still a model for ECB 30 May 2014 The Bank of England’s Funding for Lending scheme isn’t boosting bank credit. A rumoured ECB version will likewise fail to spur a massive wave of lending if demand is weak. But a round of credit easing that cuts elevated peripheral bank funding costs would still be worth a try.
Financial elite finally wake up to inequality 28 May 2014 A conference on “inclusive capitalism” brought out the rhetorical best from Christine Lagarde and Mark Carney. The IMF and Bank of England bosses flagged inequality as a problem, rather than side-stepping it. Their backing could make it easier for politicians to take action.
Fed bigwigs short of signs on path to higher rates 21 May 2014 New York’s Dudley thinks interest rates should rise slowly, Philly’s Plosser reckons they should go up faster, and Bullard of St. Louis has crunched numbers implying rates should already be at “normal” levels. Veering off the beaten track has left the Fed uncertain how to return.
Greenspan’s swipe at big bank bailouts misses mark 15 May 2014 The former U.S. Fed chair says the inevitable rescue of financial behemoths means government debt is understated. That ignores the tidy profit taxpayers made from saving Wall Street’s hide. Regulators deserve a lot more credit for limiting likely losses in future crises.