A race to the bottom?

Central banks have engaged in unconventional policies since the onset of the financial crisis in the form of QE, long-term repo operations, funding for lending and, in the US, the Troubled Asset Relief Program. Central banks’ commitment to safeguard their respective economies should not be underestimated. However, it is unsettling to see monetary authorities continue to ease policy at a time when lower oil prices are expected to boost disposable incomes and fuel global growth. Policy error is an important risk to consider when investing and given the unprecedented action taken since the financial crisis, it is difficult to gauge its impact in the longer term. Should central banks misjudge the policy responses, inflation could run higher than expected.

David Hooker – Insight, a BNY Mellon company

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