The US Fed must learn from mistakes of the crisis

A decade is a long time in central banking. Ten years ago Ben Bernanke used his speech at the Jackson Hole symposium for central bankers to explain the tumult that was rippling through financial markets at the time. He explained that while there were problems in the US housing market, the global financial system was … Continue reading “The US Fed must learn from mistakes of the crisis”

Broken-hearted again …

Having raised interest rates by 0.25 percentage points in June, the Federal Open Market Committee has indicated that it expected to hike rates once more this year and that it plans to begin its balance-sheet normalisation program (its plan to sell off the assets that it purchased under quantitative easing) “relatively soon”. In the UK, … Continue reading “Broken-hearted again …”

QE: The Beginning of the End

To limit the damage from the financial crisis, central bankers were forced into Quantitative Easing (QE) on a massive scale, in possibly the largest ever monetary policy experiment. The policy worked and confidence returned to financial markets. Nearly a decade on from those events, are we now looking at the end to QE and the … Continue reading “QE: The Beginning of the End”

What’s wrong with low interest rates?

Interest rates are low, but is this a problem?  After all, in times gone by the worry was that rising interest rates killed off economic expansions. You know the story: inflation picks up as economic slack diminishes; central banks slam on the brakes; and recession follows. Since the global financial crisis, however, interest rates (and … Continue reading “What’s wrong with low interest rates?”

Curve ball

Governments aren’t the only things proving to be less than strong and stable these days. Take the Phillips Curve, which describes the relationship between unemployment and wage growth. As unemployment falls, using up spare capacity in the labour market, it makes intuitive sense that wage growth starts to pick up. Given the key role played … Continue reading “Curve ball”

Japan traps to avoid in 2017

Discerning equity investors who focus on quality companies not temporary tailwinds can find pockets of growth in Japan the coming year. In the month since Donald Trump’s election upset, Japan’s Topix climbed 17% in US dollar terms. Almost half of this performance came from a resurgent dollar. Given the close historical correlation between Japan’s stock … Continue reading “Japan traps to avoid in 2017”

The 3 Rs of India: reforms, RBI and (US) rate hikes

It’s been a really busy quarter for reform hasn’t it? Reforms in India are like buses: none appears for ages and then several arrive at the same time! Well that’s not quite true because change was taking place but it was of the incremental, under-the-radar sort. That’s one reason why India jumped 16 places in … Continue reading “The 3 Rs of India: reforms, RBI and (US) rate hikes”

The case for a UK fiscal reset

With monetary policy measures catching all the headlines this week we thought it worth reflecting on the other side of the equation: fiscal policy. Chancellor Philip Hammond has said that the UK may have to “reset” fiscal policy in the wake of the referendum vote. This sentiment appears to chime with the mood music at … Continue reading “The case for a UK fiscal reset”