Investors get too comfy over US-euro divergence

November 19, 2015

Twin the prospect of higher U.S. policy rates with the chance of more euro zone easing and the result is eye-catching divergences in currency and interest rate markets. The problem is, such price trends are vulnerable to setbacks even if rate-setters do what’s expected of them.

Banks need more than Fed’s help to boost earnings

October 19, 2015

Execs and shareholders alike place a lot of faith in rate hikes improving the bottom line. Lenders’ stated benefits of an upward move, though, aren’t just unrealistic - they also won’t do much for returns. Higher borrowing costs also tend to hit banks with unforeseen problems.

Uncertain central bankers leave markets stranded

October 16, 2015

Investors can’t get a straight story on when interest rates will rise, or why. And they’re not sure whether delay is good or bad for stocks. So markets behave capriciously. In the murk, one thing is becoming painfully clear – the diminishing effectiveness of all monetary policy.

China’s sensible rate cut sends dangerous signals

August 25, 2015

The central bank has lowered interest rates by a quarter point and reduced the amount lenders must hold in reserve. It helps ease the slowdown and offsets capital outflows. But by responding to two days of stock market turmoil, policymakers run the risk of stoking moral hazard.

Fed might fret about emerging market “spillback”

June 16, 2015

Weak investment and import demand in developing nations is threatening to drag down U.S. growth just as the Federal Reserve mulls raising interest rates. The central bank was able ignore the effects of its bond-buying on others. But a spillback could choke the American recovery.

GE’s crumbs make for Australian buyout feast

March 16, 2015

The U.S. conglomerate is offloading its consumer lending arm down under in one of the country’s biggest private equity transactions. Yet the $6.3 billion deal shrinks GE Capital’s balance sheet by just over 1 percent. The group has far to go to reduce its dependence on finance.

Negative yields can go much more negative

By Edward Hadas
February 2, 2015

Investors now pay for the privilege of owning almost a quarter of euro zone government debt. The practice sounds strange, but monetary theory calls for it. If deflation sets in, yields could keep falling. The result might be the end of cash, or a new theory about interest rates.

Asia’s big demons: debt, deflation, demographics

January 16, 2015

The unholy trinity threatens to sap the region’s growth potential. Central banks need to fight the fiends by cutting borrowing costs so that output and prices revive. But fears of higher interest rates in the United States are prompting them to sit tight. That may be an error.

Meddling will be central banking’s new mantra

December 23, 2014

Monetary authorities haven’t stopped being responsible for financial stability. But weak output and the threat of deflation mean they can’t raise interest rates to fulfil their mandate. That leaves macroprudential policies – meddling, in plain English – as the preferred tool.

Swiss give positive lesson in negative rate policy

By Edward Hadas
December 18, 2014

A safe-haven currency can invite economic trouble. The Swiss central bank is up to the challenge. It started with market intervention and has now introduced a negative overnight rate. The Swiss realise that money is more of a policy tool than a store of value.