Central Banks Must Work Together – or Suffer Alone
In recent years, the world’s major central banks have pursued unprecedentedly easy monetary policies, characterized by ultra-low and even negative interest rates. These policies are turning out to be a classic bad equilibrium: each central bank stands to gain by keeping interest rates low, but, collectively, low rates constitute a trap from which none can escape.
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NEW YORK – Global growth seems to be moving, slowly but surely, along the path to recovery. The International Monetary Fund’s latest World Economic Outlook predicts 3.5% global growth this year, up from 3.2% last year. But there’s a hitch: the easy monetary policies that have largely enabled economies to return to growth are reaching their limits, and now threaten to disrupt the recovery by creating the conditions for another financial crisis.