With the ECB and the Bank of England both considering withdrawing monetary stimulus, it seems that change is comingby George Magnus / July 3, 2017 / Leave a comment
Last week, we got the distinct impression that change is in the air. A number of central banks, including the Bank of England, suggested that years of ultra-easy money may soon be over. In the UK, political and economic evidence of the fragile economy contrived to leave the impression that a shift in economic policy is coming.
Until now, the US Federal Reserve has been the only major central bank to put some blue water between the post-crisis monetary policies, including quantitative easing (QE), and the future. It has raised interest rates 3 times since the end of 2015, and most people think one or two more hikes are on the table this year, possibly with more to come in 2018, depending on what happens to inflation and in the economy.
Fed Chair, Janet Yellen, and others on the Federal Open Market Committee remind us they are “withdrawing monetary accommodation” rather than tightening as such. Periodically, they refer to some of the negative and unintended consequences of persistently low interest rates, such as bloated levels of asset prices—for example in commercial real estate and high yield bonds—and high levels of consumer and student debt.