While the ECB’s decision last week to begin tapering of asset purchases can be considered a positive move for the eurozone economies, it is a stark reminder of the Bank as being out of step with other policy makers.
Eurozone woes have long been a cause of headaches, though the other major developed markets are hardly in sync.
Last week, Old Mutual Global Investors’ chief executive Richard Buxton suggested Mark Carney is “facing 180 degrees in the wrong direction” with the Bank of England unlikely to follow the Fed in raising interest rates anytime soon.
A big differential in the rate cycle between the two countries, Buxton warned, would be bad news for the domestic economy yet to face up to the realities of Brexit.
While recent months have seen tentative evidence of Japan winning its battle against deflation, it too remains on a path world’s away from the direction of the west and its Asian neighbours.
With markets looking increasingly towards forward guidance for indications of the health of various economic regions, rhetoric is everything.
It makes you wonder – are policy makers just, well, making it up as they go along? After all, nobody can really be sure of the long-term impact of all the quantitative easing that has already been pumped into our economies since the financial crisis.
“Our belief is that the rise in vox populi reflects a feeling that the massive monetary stimulus measures enacted since the global financial crisis of 2008 have benefitted a small section of the population, but have failed to ignite the famous ‘animal spirits’ in the majority of voters,” says Cosimo Marasciulo, head of European fixed income at Pioneer Investments.
“With mainstream politicians facing an increased backlash from the electorate, and witnessing the rise of populist parties, many governments appear to have lost confidence in the ability of central banks to generate a broad-based recovery of any magnitude.”
