Research

Everybody's talkin'

G-4 central banks have been struggling with the constraint of the zero interest rate bound for some time now. In response, their balance sheets were increased by over 40% over 2011-12. Although balance sheets are set to increase further this year, quantitative easing is now taking a subsidiary role to communication policy—the signals policymakers send about their objectives and how they will react to changing economic circumstances—as a tool for providing additional monetary stimulus. In part, this reflects the view by policymakers that the direct impact of balance sheet expansion is increasingly limited. Policymakers are also responding to an increasingly challenging macroeconomic landscape. The past year has seen G-4 growth stagnate and core inflation rates move well below central bank targets (outside the UK). This year’s G-4 fiscal stance will deliver the largest growth drag in recent history.

	Global Data Watch: Don't you think the ECB should ease next week? Following a robust rise in economic activity and risky asset prices at the turn of the year, we have now entered a phase of moderation. …
	The J.P. Morgan View: Worse is needed to reverse the risk rally Asset allocation – Rising risk factors in last year’s trio of the US, China and Euro Area stopped the risk rally in its tracks last month but did not reverse it. Worse than we currently forecast is…

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