Tag Archives: central banks

Beyond the Covid-19 crisis, forecasts may be too optimistic

The Covid-19 crisis is one year old, and already, on the economic front at least, optimism is gaining ground.

The International Monetary Fund (IMF) economic growth projections, released last week, point to a strong rebound: the world economy is forecast to expand by 6% this year, led by emerging and developing Asia, which is expected to grow by 8.6%.

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Will digital currencies encourage debt default by stealth?

Central banks are getting closer and closer to issuing digital currencies, but this attempt to fend off the threat of cryptocurrencies raises many questions about the future of the economy.

One consequence of central bank digital currencies, which for the moment is not discussed as much as it should be, is that they could serve as “Trojan horses” for negative interest rates – and these in turn could amount to debt default by stealth.

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Emerging markets face three major headwinds

Emerging market assets have enjoyed robust performance despite the Covid-19 pandemic, with investors attracted by their higher yields and faster economic growth prospects in these countries.

But three headwinds could cut short their growth spurt: rising interest rates, environmental, social and governance (ESG) issues and the retreat of globalisation.

These headwinds are converging at a very delicate time for global markets, and at least two of them could persist for a long time.

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The Fed starts a dangerous dance with the market

With baby steps, the Fed and other major central banks are beginning their journey back towards some semblance of normality.

This will be a big resilience test for a financial system which, for more than a decade, has relied on repeated rounds of monetary generosity. Continue reading

Market turmoil tests the power of central banks

The turmoil we are currently seeing in stock and bond markets is just one battle in the war that has been going on in capital markets for a long time: debt versus equity versus central banks.

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The bad type of inflation is here

Despite good news about vaccine roll-outs, it is too early to tell when or even whether economies will fully reopen and life will go back to “normal.”

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Look at Covid-19 vaccines to gauge inflation tantrum odds

With news of another Covid-19 vaccine on its way and optimism rising ahead of the end-year holidays, it looks like 2021 will shape up to be much better than 2020.

But one forgotten danger could spoil the party: inflation. Price rises are far from investors’ minds, but an ‘inflation tantrum’ could have devastating effects on various countries’ economies if they are not kept in check.

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Debate starts on widening the mandates of central banks

The European Central Bank (ECB) seems to be wading deeper into political territory, opening an interesting debate on what exactly is the role of central banks.

The ECB recently published a guide to the banks under its supervision, explaining how it expects them to consider risks related to climate change and the environment in their business strategies and their risk management.

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Emerging markets send two big warnings to investors

With the eyes on the US presidential election and the second wave of Covid-19, investors around the world can be forgiven if they have missed two important warnings from emerging markets.

However, with the election (almost) out of the way, it may be time to go through the rest of the news flow and think properly about the two events that may have been overlooked: the postponing of the world’s biggest stock listing (China’s Ant Group), and the firing of the governor of the Turkish central bank.

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Black box or Pandora’s box? Central bankers face dilemma

By Mirela Roman

This “like-no-other” Covid-19 pandemic is clearly a dangerously unique event, with ongoing severe economic and social consequences all around the globe. Nassim Taleb has famously described the Black Swan and more recently, BIS researchers pointed to the Green Swan in reference to the impact of climate change.

But the Covid-19 Swan is quite a combination of colours. It is an ongoing emergency situation, with fear often overcoming hope while anxiety heightens amid a decline in living standards.

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