Central banks launch growth mission.
“There are limits on what further monetary easing can achieve,” Reserve Bank of Australia Governor Philip Lowe said in June. “You still get benefit from it, but there are limits.”
Led by President Donald Trump attacks on the Fed, political pressure is mounting on central banks to do more.
$13 trillion of bonds now boast yields below zero, yet monetary-policy impotence was a major worry of money managers surveyed last month by Bank of America Corp.
“Cutting rates now makes sense given the softening activity,” said Janet Henry, chief economist at HSBC Holdings Plc. “No central banker wants to be held responsible for failing to be nimble enough to prevent expansion from coming to a halt.”
“Given the current level of inflation expectations and the current level of rates, doing QE again is not going to create the same surprise effects,” said Slok.
“I see three ‘Ds’ that make monetary policy less potent: debt, demographics, and digitalization,” said Jerome Jean Haegeli, chief economist at the Swiss Re Institute in Zurich. “These are all structural factors that are here to stay.”
“While most would like to argue that they are not Japan, much of the developed West has indeed followed Japan’s path, with varying lags,” said Stephen Jen, who runs Eurizon SLJ Capital, a hedge fund and advisory firm.
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