Euro zone can afford to keep fiscal taps running 31 Jan 2023 The bloc’s governments pumped up spending by 3.75% of GDP over the past two years to cushion the blow of Covid-19 and higher energy prices. Now they are closing the spigots. That’s a mistake. Manageable debt costs leave room to support growth – and help the ECB fight inflation.
Capital Calls: McDonald’s, Spotify 31 Jan 2023 Concise views on global finance: The burger chain’s comparable sales growth despite rising prices proves there’s pricing power at the bottom of the market; shares in the $21 bln music-streaming service leapt after founder Daniel Ek unveiled rapid subscriber growth.
EU debt fears hinder U.S. green subsidies riposte 24 Jan 2023 Ursula von der Leyen has pledged a European response to protectionist U.S. energy handouts. The European Commission president can improve permitting speed and offer token subsidies. But her best weapon, a permanent form of the EU-wide pandemic bond-sale programme, is far off.
Britain can afford to pay nurses and teachers more 20 Jan 2023 UK public workers want a big raise from the government. An inflation-matching pay rise would cost 18 bln pounds; growing state employees’ salaries in line with the private sector around half that. Downing Street could fund it with a 1p rise in VAT and closing tax reliefs.
Thrifty holidays lift odds of a soft U.S. landing 18 Jan 2023 Spending at U.S. retailers and restaurants slid 1.1% in December, marking the largest drop in a year. High prices and shrinking savings are finally leading Americans to rein in their demand. It’s a promising sign that the U.S. can beat inflation without a severe downturn.
Bank of Japan has learnt danger of half-measures 18 Jan 2023 The central bank’s decision to stay put on interest rates saw the yen soften and hurt 10-year bond yields. Last month’s surprise tweak to bond trading bands failed to impress traders. Inaction may be painful and expensive, but muddled economic signals make it understandable.
Capital Calls: Prices down, jobs saved? 12 Jan 2023 Concise views on global finance: New data shows U.S. prices falling 0.1% in December, marking the largest drop since early 2020. With inflation in retreat, the Fed can focus more on keeping Americans employed.
Capital Calls: California flooding 11 Jan 2023 Concise views on global finance: Heavy rainfalls have revealed the cracks in California lawmakers’ disaster spending measures, that have helped to prepare for fires and earthquakes.
European inflation control is a double-edged sword 6 Jan 2023 Prices in Spain or France have risen less than in other big euro zone economies. One reason is lower dependence on Russian energy, but government price controls also helped smooth the shock. The risk is that suppressed inflation will catch up after the crisis subsides.
Fed battle has workers taking hit for greedflation 3 Jan 2023 The U.S. central bank has repeatedly warned that cooling inflation will bring "some pain" to workers. Employees already suffered as prices surged and profit climbed during the pandemic. A less aggressive fight against rising prices would give workers some much-needed support.
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.
ECB, BoE will fight to regain anti-inflation mojo 15 Dec 2022 The European Central Bank and the Bank of England hiked rates by 50 basis points, less than recent jumbo increases. Recession fears, and the central banks’ initial hesitancy, are making investors sceptical of a sustained tightening. Sticky inflation will prove them wrong.
China reopening is mixed blessing for inflation 15 Dec 2022 The country’s exit from its “zero-Covid” policy, though hesitant, will bring Beijing back to the top economic table. That will unblock global supply chains, easing price pressures for importers. For the euro zone, however, it also means increased competition for energy resources.
EU angst over “Buy American” reopens old wounds 14 Dec 2022 European policymakers are in a tizzy over local subsidies in President Joe Biden’s Inflation Reduction Act. Technical tweaks may level the playing field a bit. Even so, the bill rekindles long-running disputes over who picks winners and losers in the EU – and who should pay.
Betting against the Bank of Japan 13 Dec 2022 Investors are closely watching for signs that Tokyo might finally start winding down its ultra-low interest rates as inflation rises. In this Exchange episode, Pete Sweeney chats with Sayuri Shirai, former BOJ policy board member, about whether and how Japan might adjust.
Inflation confusion increases odds of ECB mistake 30 Nov 2022 Euro zone prices rose a less-than-expected 10% in November, yet remained stubbornly high after stripping out fuel. That leaves central bankers in a pickle. To burnish their hawkish credentials with a sceptical market, they may keep tightening policy even as the economy falters.
Consumer spending anomalies are the new norm 29 Nov 2022 High inflation and glum sentiment are changing how people use their money. In this edition of The Exchange podcast, Brookings Institution economist Wendy Edelberg explains what shoppers are loath to give up during times of duress and why strange patterns will persist.
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.
Bloated Thanksgiving will dispirit Xmas shoppers 23 Nov 2022 Thursday’s turkey and cranberry feast is set to cost 20% more than last year’s. Supermarket sticker shock may leave consumers thriftier when seeking stocking stuffers. And even if retail spending hits a record $960 bln, the season will be less merry once adjusted for inflation.