NEW YORK – Financial markets are starting to get rattled by the winding down of unconventional monetary policies
in many advanced economies. Soon enough, the Bank of Japan (BOJ) and
the Swiss National Bank (SNB) will be the only central banks still
maintaining unconventional monetary policies for the long term.
The US Federal
Reserve started phasing out its asset-purchase program (quantitative
easing, or QE) in 2014, and began normalizing interest rates in late
2015. And the European Central Bank is now pondering just how fast to
taper its own QE policy in 2018, and when to start phasing out negative
interest rates, too.
Similarly, the Bank
of England (BoE) has finished its latest round of QE – which it launched
after the Brexit referendum last June – and is considering hiking
interest rates. And the Bank of Canada (BOC) and the Reserve Bank of
Australia (RBA) have both signaled that interest-rate hikes will be
forthcoming.
Still, all of these
central banks will have to reintroduce unconventional monetary policies
if another recession or financial crisis occurs. Consider the Fed, which
is in a stronger position than any other central bank to depart from
unconventional monetary policies. Even if its normalization policy is
successful in bringing interest rates back to an equilibrium level, that
level will be no higher than 3%.
https://www.project-syndicate.org/commentary/unconventional-monetary-policy-new-normal-by-nouriel-roubini-2017-07
Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics
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