China’s yuan plausibly mimics a safe-haven asset 25 Feb 2022 The currency, once subject to speculative swings, has stayed stable as Russia attacks Ukraine. It’s buttressed by a big trade surplus and central bank conservatism, both of which might change, but it has clearly gained traction with serious investors.
Viewsroom: Ukraine, ECB and India’s giant insurer 17 Feb 2022 Worries about an invasion of Ukraine have rattled markets, but Dasha Afanasieva says Russian investors are more sanguine. The European Central Bank faces a tougher inflation juggling act, argues Swaha Pattanaik. And Una Galani discusses the listing of India’s Life Insurance Corp.
Biden’s bungled Fed pick symptom of larger disease 16 Feb 2022 The U.S. president’s central bank nominee is a climate stalwart, prompting Republicans to boycott a vote. A pattern of drafting political candidates for non-partisan outfits, like the FTC, is emerging. It’s counterproductive and can also widen agency mandates in dangerous ways.
China prices are cold comfort for global shoppers 16 Feb 2022 Factory-gate prices softened, and consumer inflation rose just 0.9% as supply shortages eased. Domestic stimulus might not change much. That’s good news for overseas customers grappling with soaring costs. But a weak Chinese economy will have less desirable knock-on effects.
ECB has central banking’s hardest juggling act 15 Feb 2022 President Christine Lagarde faces a less acute inflation problem than U.S. or UK peers. But she’ll have to raise interest rates to curb price pressures while ensuring bond yield gaps between euro zone nations don’t widen to worrying levels. The two goals may become incompatible.
Soaring prices warrant bigger Fed rate hike 10 Feb 2022 U.S. inflation hit a 40-year high of 7.5% in January. Broad-based increases in costs and a robust jobs market give the central bank ample justification to hike rates by half a percentage point, rather than a quarter, and show that it’s serious about tackling price pressures.
Guest view: Fed hikes spell emerging-market strain 4 Feb 2022 Poorer indebted economies face growing difficulties as the U.S. Federal Reserve signals its readiness to raise interest rates. William Rhodes, former president of Citibank, and economist Stuart Mackintosh lay out what creditors, borrowers and the IMF can do to avert a crisis.
Big Oil elbows out banks as Fed’s new kingmaker 3 Feb 2022 The energy sector has come out swinging against Sarah Bloom Raskin, President Biden’s pick to lead supervision at the U.S. central bank. The ex-Fed governor is outspoken on climate risks. The business lobby could frustrate her confirmation, even with Democrats in Senate control.
ECB shows words matter more than actions 3 Feb 2022 President Christine Lagarde left interest rates unchanged while the Bank of England raised them. Yet she made the bigger market splash by admitting inflation risks had grown. It was the first clear sign that she may join global peers this year in tightening monetary policy.
New Bank of England guessing game begins 3 Feb 2022 A second rate rise in as many months raises the question of how quickly Governor Andrew Bailey will reduce bond holdings accumulated during the pandemic. A gradual approach won’t cause economic or market pain. But debt yields will become more volatile once the Fed follows suit.
Oil dims hope central bankers will walk fine line 28 Jan 2022 Brent crude topped $91 a barrel for the first time since 2014. Rate-setters can usually ignore temporary jumps, but not when inflation is already high. Fed boss Jay Powell and global peers will struggle to hike rates enough to curb price pressures without stifling growth.
Investors need to get used to working harder 27 Jan 2022 America’s economy expanded at a 6.9% annual pace in the last quarter of 2021. A healthy rebound supports the Fed raising interest rates soon. But the U.S. central bank faces a balancing act, and everyone else following markets will have to be more alert than before, too.
Jay Powell embarks on difficult Goldilocks act 26 Jan 2022 The Fed boss is likely to signal rates will start rising in March to curb inflation. The robust economy can cope with that as well as the three other hikes that investors expect him to deliver before year-end. Anything more will leave little room to deal with economic hiccups.
Fed rate feast leaves crumbs for bank customers 19 Jan 2022 Big U.S. lenders like JPMorgan are readying for an inflow of interest income as the central bank puts up rates. But the amount they pass to depositors is likely to be even more paltry than in past cycles. Competition from upstarts like SoFi may improve service but not returns.
Christine Lagarde will win rate rise timing tussle 19 Jan 2022 Money markets imply the European Central Bank will hike twice this year, even though its boss says policy tightening is unlikely in 2022. She will have to work hard to convince markets, but reason is on her side. Wage pressures are less evident in the euro zone than in America.
Banks’ rate-rise rewards may be bigger than ever 17 Jan 2022 Deposits at large U.S. lenders are up by a third since 2019 to $11 trln. They’ve stashed much of the cash in central-bank reserves, which immediately earn more as rates go up. Tighter monetary policy usually helps banks, but especially so given their current mix of assets.
Central banks will give risky debt a helpful shock 13 Jan 2022 Benchmark bond yields are rising as rate-setters around the world scale back asset purchases. That will reduce the appeal of corporate debt, but a correction in credit markets is nothing to fear. A setback may lead to less hazardous terms for bondholders, and a rout is unlikely.
Turkey’s lira prop-up plan is dangerous 21 Dec 2021 President Tayyip Erdogan is guaranteeing deposits against local currency drops. It’s tacit admission Turkey’s banks aren’t immune to fallout from his odd views on inflation and interest rates. Details are fuzzy but putting taxpayers on the hook for the lira is asking for trouble.
Trailblazing UK rate rise may pay off in the end 16 Dec 2021 The Bank of England is the first major central bank to hike its policy rate. The ECB faces less acute price pressures and the Fed must consider the job market alongside inflation. It’s a gamble, but acting now means British rate-setters will have less hiking to do in the future.
New Fed dot plot joins unreliable post-Covid data 15 Dec 2021 The U.S. central bank’s signature chart of interest-rate expectations now foretells three hikes in 2022. But the forecasters will change as three seats on the Fed’s board open up. Other economic reports and the recovery are also hard to interpret. The dots are far from settled.