The Changing World of Central Banks

It seems week by week that central banking institutions are only becoming more uncertain about what kind of actions to take in the current economic climate.

There is considerable hesitancy surrounding the choice of the FED to leave the base rate unchanged, this had considerable international repercussions with having to continue handling its deteriorating situation with no clear resolution, while the ECB and Bank of England are waiting in the wings taking a strategy of what seems to be follow the FED.

Mark Carney has begun his warning to expect monetary tightening in the near future, continuing with a vague timeline. While commentators in the United States who have been investigating the FED’s books that have a two week lag are beginning to hypothesise that there won’t be a rate rise in early 2016.

The key element here is looking at the behaviour of inflation over 2015 with targets regularly missed, while lacking concrete explanations for why. Both UK and US economies are experiencing growth albeit at low rates. Therefore, acting upon base rate may seem to extreme at the moment. The Bank of England has instead taken up to involving itself in politics discussing the impacts of leaving or staying in the eurozone, while they haven’t made their stance that abundantly clear as some saw it as euro skeptic and others as reasons to stay in.

We are entering a unique period where these critical financial institutions are struggling to grip with conventional policy practice, and potentially look for better ways to understand the economic climate.

CNBC have a great report on the FED actions that I recommend reading http://cnb.cx/1P0lM0k, while Krugman had a great post along similar lines on Saturday http://nyti.ms/1LNePeJ

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