US deficit problem screams for revenue solution 23 Oct 2023 Rising interest costs threaten to widen a $1.7 trln budget gap already stretched beyond 7% of GDP. Lawmakers are haggling about spending, but the math only works with higher taxes. It means closing an inheritance loophole, charging the rich more and resetting the corporate rate.
China’s leaders speed towards Japanisation 20 Oct 2023 The People’s Republic invests more than Japan did at the height of its 1980s asset bubble. China’s real estate is more overvalued, and its debt is higher. President Xi Jinping’s centralised rule and stifling of private enterprise increase the risk of Japanese-style lost decades.
Bond blues kick the fun out of racy stocks 2 Oct 2023 Yields are rising for the wrong reason – persistent inflation rather than growth. That’s pushing shares down as well. Some companies will suffer more. Those with higher portions of cash flows coming in the future, like technology firms, are most vulnerable.
Central banks start game of chicken over rate cuts 21 Sep 2023 Officials in Sweden and Norway hiked borrowing costs, while their British peers didn’t. All hinted policy will stay tight, fearing that stoking expectations of an early start of the loosening cycle may fuel inflation. An economic slowdown may prompt rate-setters to be less tough.
ECB’s rear-view policy risks crashing the economy 14 Sep 2023 Fears of stubbornly high consumer prices prompted President Christine Lagarde to push rates to a record 4% on Thursday. Yet the central bank admits inflation will be around the 2% target by 2025. The bloc’s growth is already stagnating. The latest action will worsen its plight.
Flood insurance swamps US government 11 Sep 2023 A federal scheme to back policies for water-logged homes is set to be renewed. Failing to do that would worsen a housing shortage. But the program is already laden with debt. Fixes like flood-prevention infrastructure can lower costs for the government and homebuyers alike.
Lagarde can stop fretting about rising salaries 11 Sep 2023 The European Central Bank chief worries that consumer prices will stay high because wages are growing at the fastest rate in 30 years. Yet raises are below inflation and slowing. In the past, the ECB cut rates even with strong labour markets. It may have to do so again soon.
Central bank peanuts highlight China’s policy gaps 15 Aug 2023 A surprise rate cut failed to soothe markets rattled by a weak economy and property defaults. The People’s Bank of China is limited by thin bank margins and the risk of outflows. Loose monetary policy won’t help demand, if President Xi Jinping keeps ducking bolder fiscal action.
Russia’s jumbo rate hike leaves Putin in hot water 15 Aug 2023 A plunge in the rouble and the Kremlin’s prodding forced the central bank to raise borrowing costs by 3.5 percentage points. The currency’s muted reaction leaves the president with more bad choices: restrict welfare spending or hope that even tighter policy can curb inflation.
Rate jujitsu is no blow to Japan’s foreign assets 4 Aug 2023 The central bank’s shock tightening of monetary policy last week sparked fears investors would rush to repatriate the $5.4 trln of assets they hold overseas. Low yields at home and funds’ caution after years of disappointment will ease any tide. Big debtors like the US can relax.
Bank of England rate dilemma holds little mystery 2 Aug 2023 Governor Andrew Bailey must decide on Thursday whether to raise borrowing costs by a quarter or half a percentage point. The choice will make little difference to the long-term path of interest rates. Inflation is falling and monetary policy alone cannot boost sluggish UK growth.
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.
UK inflation dip puts Andrew Bailey on the spot 19 Jul 2023 The growth in UK consumer prices slowed more than expected in June, to 7.9%. It’s welcome news for households, and sent British stocks soaring. The Bank of England governor, though, is likely to keep hiking rates, increasing the risk he will go too far.
New Aussie central bank boss faces two-front war 14 Jul 2023 Deputy Governor Michele Bullock is replacing Philip Lowe. She’ll wield less power in a more independent institution than her gaffe-prone predecessor. The inside pick offers stability as the Reserve Bank battles an economic slowdown and the prospect of El Nino-driven inflation.
Andrew Bailey’s silence is hurting UK homeowners 12 Jul 2023 Traders’ confusion over the Bank of England’s decisions is sending market interest rates wild. That has pushed the cost of a popular mortgage to a 15-year high. To limit household pain, the governor needs to ditch his usual reticence and tell markets that they are wrong.
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.
The next revolution in monetary policy is underway 30 Jun 2023 Central banks are grappling with rising prices and fragile financial markets, raising doubts about their focus on price stability. Recent interventions by the International Monetary Fund and Bank for International Settlements are signs of a broader rethink, says Felix Martin.
Central banks’ calls for pay restraint ring hollow 29 Jun 2023 Western central bankers want workers to ask for lower raises unless firms cut their margins to compensate staff. With salaries growing less than inflation, that’s a harsh demand. Past rate rises will in time cool labour markets. Officials need to talk less and wait longer.
Bank of Italy pick will give Italy an EU headache 28 Jun 2023 ECB member Fabio Panetta is heading home to lead the national central bank. That will remove a dove from Europe’s rate-setters, just as they pursue a hard line on inflation. To send another Italian to Frankfurt, premier Giorgia Meloni may need to compromise on Brussels issues.
Credibility crisis requires BoE to write new plot 20 Jun 2023 The Bank of England’s inflation outlook is faulty because it relies on traders’ expectations. That leads markets to overreact to data, causing pain for homebuyers and firms. Adopting the US system, where policymakers make predictions, would curb policy mistakes and volatility.