In a Fracturing World, Central Banks Still Stuck Together
WASHINGTON/TOKYO/FRANKFURT (Reuters) – The last time major central banks shifted gears together, it was a cooperative move to keep the financial crisis of a decade ago from becoming a full-bore, worldwide depression.
Now, a new round of global ratecutting risks taking on a competitive edge as policymakers try to stay ahead of rising trade tensions, a volatile investment climate, and a shift in the political mood from shared support for globalization to a more zero-sum battle over a slower-growing world economy.
It’s a situation that has created deep internal divisions at the European Central Bank, the Bank of Japan and the U.S. Federal Reserve as officials debate how to confront a global slowdown with limited room to cut interest rates, and with elected officials pursuing policies that may be doing harm, at least in the short run.
The three institutions, particularly the Fed, set financial conditions that influence interest rates, exchange rates and capital flows worldwide, and all three are expected to loosen monetary policy when they meet over the next eight days.
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