Interest rate cuts and clearer guidance are in the air as global growth slows
It has been evident since the global financial crisis that when short- and long-term interest rates are already very low, further cuts make little difference to real economic activity
As leading central bankers met last week in Jackson Hole, Wyoming, financial markets and media anxiously awaited indications of future policy direction. The topic in 2019 was “Challenges for Monetary Policy”, and amid slowing global growth the talk is of interest rate cuts and clearer forward guidance.
In September the European Central Bank may commit to keeping rates below zero beyond 2020. Some economists think the Bank of England’s monetary policy committee should make explicit interest rate forecasts, mirroring the US Federal Reserve practice. Many hope the Fed’s recent 25 basis point rate cut will be the first of many. Governor Haruhiko Kuroda of the Bank of Japan faces calls for action to counter stubbornly low inflation. More quantitative easing is possible.