While all eyes are on what central banks will do with interest rates, consumers and investors alike should really worry about what commercial banks will do.
Continue readingTag Archives: monetary policy
Beware value traps when hunting for stock market bargains
European stock markets recouped all the ground lost since the February 24 Russian invasion of Ukraine, but investor optimism may be misplaced.
Continue readingBank of England ignores the elephant in the room: Brexit
The Bank of England has ignored inflation for so long that is now clearly behind the curve, and getting more and more desperate to catch up.
But the central bank is in danger of scuppering its own purpose by ignoring another big change to the economy: Brexit.
Continue readingWhy the ECB is in no hurry to fight inflation
The euro has lost a lot of ground versus other major currencies as the European Central Bank (ECB) is taking a very dovish stance even compared to the usually dovish Bank of England.
As expected, a German has the difficult task of being a lone hawk amid doves: Isabel Schnabel, member of the ECB’s Governing Board, recently warned that the central bank has consistently been wrong in its inflation forecasts.
Continue readingInvestors fear inflation but run to it
Recent capital flows highlight a paradox: investors are afraid of inflation, but seem to have increased their allocation to just the assets that would do worst out of it.
Continue readingBeyond 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%.
Continue readingWill 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.
Continue readingEmerging 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.
Continue readingThe 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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