MIKE DOLAN: The success of 2022’s three market interventions — from the US to Japan and Britain

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Crude oil, Japan’s yen and British gilts all had extremely turbulent years and required the successful, but much doubted, direct action by governments

Even mention government or central bank intervention in financial markets to many professionals and you elicit a tirade on such futility against forces beyond control.Times are, of course, extraordinary. The messy, inflationary global economic reboot from a once-in-a-century pandemic was compounded this year by war in Ukraine, an energy shock and severe sanctions. Multiple subsidies and attempted price caps of one sort or another have followed.

Against that, this year was marked by three very different examples of direct financial market intervention that appear to have succeeded in their narrow and targeted goals at least — despite many doubts whether they would or even could work. Early post-invasion forecasts of crude prices anywhere between $150 and $200 a barrel have certainly proved well wide of the mark so far — even after oil-exporting nations cut production again. And it was at least in some part due to the SPR intervention, even if that was aided by central bank tightening and slowing world demand.A dramatic offshoot of this energy shock were the shifting inflation sands, differing central bank responses and wild currency swings against a soaring dollar this year.

But after weeks of verbal warnings of excessive moves that just risked exaggerating Japan’s more muted inflation pulse, the BOJ stepped in for the first time this century in September and October with several rounds of intervention to buy yen for tens of billions of dollars. With the dollar widely viewed as overvalued, the open-ended BOJ move showed it had both the firepower and the stamina to see off frothy speculation at least — not unlike a similarly successful exercise by the European Central Bank to buoy the new euro back in 2000.The third celebrated intervention of the year followed a more self-inflicted bout of volatility in Britain’s government bond market after September’s disastrously botched budget.

 

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