Tag Archives: interest rate

Why I hope Liz Truss is lying

Liz Truss, the favourite in the race to succeed Boris Johnson as prime minister, has laid the blame for inflation at the door of the Bank of England, saying it must do more to fight price rises.

Truss also said she would change the Bank of England’s mandate if she becomes prime minister, to ensure that the central bank fights inflation more efficiently, but gave no details about what that change would entail.

With consumer price inflation hitting a 40-year high of 9.4% in June, you may think she has a point. The Bank of England is behind the curve, but when it comes to changing the central bank’s mandate, I really hope Liz Truss is lying. If she is not, then we should all be very afraid.

Continue reading →

A recession would threaten central banks’ independence

Central banks are again under the limelight. With Mark Carney’s departure as governor of the Bank of England next month, Boris Johnson could try to seize the opportunity to curtail the central bank’s independence.

This should not come as a surprise. Already, Johnson’s soulmate from across the ocean, Donald Trump, has been making noises about the Federal Reserve being too independent (or rather: insubordinate) for his liking.

So, if these two authoritarian populists go for central banks, what are their chances of bringing them under their rule?

Continue reading →

Central banks enabled populism; they will soon pay the price

It is becoming increasingly difficult for central banks to surprise the markets with good news. No matter how dovish they are, investors expect them to be even more dovish still. This financial repression has facilitated the rise of populist politicians, who threaten to bring the end of central banks’ independence.

Continue reading →

Central banks cannot paper over the cracks of populism

Central banks are trying to prolong the decade-old bull market, but it looks like instead of reassuring investors, this makes them nervous.

Continue reading →

What’s behind the Fed’s ‘whatever it takes’ moment

January was an extraordinarily positive month in the markets for virtually all assets, after a horrible 2018 — and it’s all due to the Fed. The US central bank executed a massive U-turn in its monetary policy and, while many observers like to point to low inflation as the reason for the Fed’s aborted effort to normalise monetary policy, something more sinister is behind it.

Continue reading →

If you are stockpiling ahead of Brexit, you need to stop

I know the chances of anyone paying attention to this article are slim, but it’s worth putting it out there nevertheless. If you are stockpiling to prepare for Brexit, as it increasingly is the fashion, you need to stop. You are doing yourself and the others around you more harm than good.

Continue reading →

Central banks have bad news for property investors

As the major central banks are slowly retreating from their policy of asset purchases, we will probably witness some of the side effects of this withdrawal.

Warren Buffett famously said that “Only when the tide goes out do you discover who’s been swimming naked.” The tide is going out only slowly, but we are beginning to see, at least in the UK, the damage the ultra loose monetary policy has done.

Continue reading →

As home prices hit record levels, negative equity looms

A statement from Halifax shares the “good” news: home prices paid by first-time buyers are the highest ever.

In the first half of this year, first-time buyers paid on average £207,693 for a home, the highest price on record. This is 4% higher than a year ago, and 50% higher than five years ago.

Continue reading →

Banking on a rate cut in India after demonetization

By Sourajit Aiyer

The Indian central bank’s upcoming policy review this week, a month after demonetization, holds ample suspense for a possible interest rate cut.

The demonetization of Rs 500/1,000 currency notes since November 8 has led to a rapid inflow of deposits in banks. Brought in to fight black market money and counterfeits, the amount in circulation in these notes was estimated at around Rs 14 trillion, i.e.  about 86% of the total.

Citizens were asked to deposit them in their banks, leading to the deposit surge. The Hindu, a leading daily, said ~Rs 8.5 trillion had been deposited by end November and estimated it to reach  between Rs 10-11 trillion by early-December.

Continue reading →

Contrarian ‘buy’ signals are strong, but so is the fear of debt

The contrarian “buy” signals in the markets keep increasing, but this doesn’t mean investors will rush and buy like in the good times.

Continue reading →