Australia avoided quantitative easing thanks to Labor’s stimulus, but for other countries it has become the norm and now more rate cuts are a possibilityPolicy experiments continue to be a feature of the global economy with the European Central Bank and Bank of Japan moving official interest rates below zero. This follows the earlier radical decisions of the US Federal Reserve and Bank of England to engage in quantitative easing, which in effect dumped cash into the banking system in the hope that some of the excess money would flow to the private sector and be invested, spent and drive economic growth.Related: Gilts plunge as interest rate rises recede Continue reading...

Warning over US economy triggers late sell-off on Wall Street, weighing on markets in Asia and EuropeGlobal stock markets are sliding to new lows as fears of recession grip investors.The warning from the US Federal Reserve chair, Janet Yellen, on Wednesday that the world’s biggest economy could be hit by the current turmoil led to a late sell-off on Wall Street, which has followed through to Asia and Europe on Thursday.I think this is going to be a difficult year for investors and even a fledgling US economic recovery looks to be snuffed out by global markets development.There is very little good news and continuous bad news and this is a test of market confidence.Related: Market turmoil: FTSE 100 hits lowest since July 2012 as rout deepens - business liveWhat this shows is that the risk-off mode has come back very quickly and that the worst may still be to come in these markets. What is different to previous times is that the bad news in now coming from everywhere – China, Portugal, the US, the commodity sector, the banking sector. It’s like several smaller crises could combine into one big crisis. Continue reading...

The chair of the Federal Reserve, Janet Yellen, appears before Congress on Wednesday to report on the state of the US economy, and says that she anticipates further rises in interest rates despite global stock market upheaval. Highlighting the growth in employment rates and wages, Yellen says the Federal Open Market Committee expects ‘gradual adjustments in the stance of monetary policy’, but suggests these hikes could come at a slower pace than anticipated if the economy were to underperform over the coming year Continue reading...

As Janet Yellen heads to Capitol Hill, it may be tempting to vow she will stick with her plan. She would do better to keep her options wide open in a world of financial fluxThe way to earn authority is, very often, to say that something is going to happen before it does. In December, the chair of the Federal Reserve, Janet Yellen, was lauded for raising interest rates just when everyone expected it. The Fed also gave hints about the pace and scale of further rises later on. And if the future unfolds in line with the plan, the words of Ms Yellen will acquire extra weight – weight that is undoubtedly useful when you are steering the world’s largest economy.It may thus be tempting, and not only for reasons of pride, for Ms Yellen to pretend that not all that much has changed since the end of last year when she faces two committees on Capitol Hill on Wednesday and Thursday. But it is a temptation she should resist. For if nothing burnishes authority like foretelling the future, nothing breaks the spell of command like responding to changing facts with denial. The Fed rightly held back from rushing to conclusions about the recent wild swings in the markets last month. But it is now safe to conclude one thing: just how much there is that the powers that be don’t know. Continue reading...

Weak global economy and sharp slowdown in UK growth will prevent any rise from 0.5% for at least four years, says EIUAnxiety in global markets and a weakening US economy will force the Bank of England to delay UK interest rate rises until at least 2020, according to a leading firm of analysts.The Economist Intelligence Unit (EIU) forecast, which will cheer mortgage borrowers and disappoint savers, extends by at least three years the timeline for the central bank’s first increase from the historically low 0.5%.Related: Market turmoil: European markets fall again after Japan's 5% rout – live updates Continue reading...

Worries over the world economy and the outlook for banks have sent global stock markets tumbling again

With the US and the world economy looking much weaker than two months ago, Janet Yellen must signal that a March rate rise is off the agendaShare prices are tumbling. Bank shares are being clobbered. There is talk of a US recession, induced by a strong dollar that is already causing havoc in China, much of the rest of Asia and Latin America. In the good – or bad – old days, we could predict what the chair of US Federal Reserve would do in these circumstances. Alan Greenspan would cut interest rates, or hint at his intention to do so.Is Janet Yellen, Greenspan’s successor but one, of similar mind? If she is, she has an opportunity to say so on Wednesday when she begins two days of testimony before Congress. This event has suddenly assumed an importance that seemed unlikely when the Fed raised interest rates last December for the first time since 2006.Related: Fears over weak growth cause global stock markets to fall Continue reading...

The chancellor has made his name by talking tough. But a new audit of his stern promises reveals that they are less than they seemMore than seven years have passed since George Osborne stood up, at the depth of the financial crisis, and pronounced that “the cupboard is bare”. He had previously been the young Tory moderniser, pledged to match New Labour’s social spending, but when hard times came, he recast himself as an old-fashioned bank manager, who would not shrink from telling Britain how broke it was.The same solemn pose has served Mr Osborne well ever since. It allowed him, first, to cling on at the Treasury, which wasn’t a given during the stagnation that dogged much of the first Cameron administration. It contributed, too, to his party’s stunning success last year in coming back at the end of a five-year term of shared power, during which average living standards had fallen, with a mandate to govern alone. Spelling out hard truths has proved a winning trick even when these turned out not to be, well, true. It did Mr Osborne no damage at all when his defining promise to pay down the deficit in the course of a single parliament gradually collapsed into a 10-year plan. It did him no harm, either, when he sternly committed in 2014 to the grim necessity of rolling back the size of the state to prewar proportions, before deciding that this was not after all quite necessary just before polling day, and then indulging in a second post-election rethink, deciding that he could now afford to throw a shield over the police and the army. Continue reading...

The IFS says the chancellor’s plan to turn a deficit into a surplus is good politics but bad government, especially given the reliance on tax receipts and oil pricesThe last time the government showed a determination to turn a budget deficit into a surplus it was the mid-1990s. Ken Clarke was the chancellor and it was, he said, the responsible thing to do in the wake of the debts racked up following the 1990 recession.George Osborne also wants to achieve surplus, and one trend that could help him is the low oil price. If there was one overriding feature in the 1990s that kept the global economy growing and the tax receipts rolling in, apart from the giddy tech boom, it was oil at $12 a barrel.