The ECB has (naturally) changed substantially throughout its brief existence. But the current changes are more fundamental, affecting the core of the Bank’s behaviour. Once the question was how Italy would be able to live with a German currency. Now it looks the other way around, how will Germany live…
In theory, the ECB should find it easier than most central banks to fight inflation. In fact, it is finding it more difficult, preferring to do nothing and rely on Mr Micawber’s dictum. This is partly because the ECB is in a process of transition, from ‘Teutonic’ to ‘Latin’. All…
In spite of recent victories, populism usually fails, mainly because of its inherent contradictions But this does not deal with the underlying causes of populism The liberal order can triumph, but not by attempting to ‘out-populist’ the populists or by treating voters as ignorant fools Previous articles in this series…
Digital currencies – sometimes called cryptocurrencies – are suddenly much in the news. What is behind this, and what is the future for this new form of finance?
So far in this series of articles, we have considered the immediate challenges in front of central banks, which in a nutshell revolve around the normalisation of monetary policy and the re‑establishment of a more orthodox relationship with markets. In this final article we consider the longer term outlook, once…
With the US Federal Reserve widely expected to start the process of shrinking its balance sheet in the next few months – a process that has been christened Quantitative Tightening or QT – we consider the consequences for economies and markets of the approaching normalisation.
Central banks have always said that the unconventional monetary policy measures they have introduced in recent years are temporary, and they have been keen to restore policy to “normality” when the time is right. As that time approaches, the urgent question is what the great unwind will entail and how they will carry it out.
For much of the last 8 years, there has been an active debate on what central banks were doing to combat the threat of a second Great Recession. But as the period of extreme monetary policy draws to a close, the discussion is beginning to look forward, and to what the future policy framework for central banking should be.
Should central banks shrink their swollen balance sheets? And, if they do, how should it be done and how far should it go? In the two months since we last addressed this subject the debate has developed further.
