A Bad Idea Returns: Negative Deposit Rates

As ECB policy rates skirt the zero bound, expectations for the use of alternative tools, such as negative deposit rates are again on the rise. However, this is  an ineffective and potentially harmful policy option. Several problems may arise: transmission across other rates in the financial system is not guaranteed, bank profitability would almost certainly suffer, logistical […]

Market Prospects Ahead of the QE3 Wind-Down

The Fed surprised markets with a more hawkish posture than expected, suggesting the start of QE tapering in late 2013 and completion by mid-2014. While Fed guidance may not ultimately come to pass, EM equity markets in particular remain subject to further downside. True, this year’s sell-off has been much more rapid than when QE ended previously. But its scale so […]

Beyond Cyprus: Implications of the Latest ‘Unique Solution’

Call it sequestration, expropriation, default or a bank levy. All of these ring true in economic terms but legally speaking, the latest move by the troika and Cyprus designed to top up a Eur10 bn bail-out package for its banks  is merely a tax. And not a particularly onerous one at that: 6.75% (or less) […]