There are several tools in the monetary policy box. Since the financial crisis erupted in 2008, central banks around the world have used zero interest rates, negative interest rates and quantitative easing, or QE, to combat the downturn in terms of growth and inflation.
Now the world’s four largest central banks look set to modify their monetary policies before the end of the year, albeit in different directions.
In December, the Federal Reserve is expected to raise its benchmark interest rate for the first time in nine years, whereas the European Central Bank, Bank of Japan, and the People’s Bank of China will likely further relax monetary policy.
Economists have begun to question whether expansive monetary policy is achieving the desired effects. They are concerned that even more quantitative easing could even yield negative results.
In contrast, many of us – myself included – believe we would be in a deep recession without the measures taken by central banks to date. We also believe the world economy still needs to be stimulated through monetary policy.