Economic policy: A world of cheap money

Posted: April 5, 2013 in economy
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Economic policy


The Federal Reserve is making a better job of it than the European Central Bank

THE low-rate world was not meant to last. In 2008-09, when central banks slashed short-term rates close to zero and started buying bonds to push down longer-term rates, everyone assumed these extraordinary measures would soon be unwound as economies recovered.
But the extraordinary has become the norm. America’s Federal Reserve is still printing money to buy bonds and has made it clear that it will not raise short-term rates at least until unemployment, now close to 8%, falls to 6.5%. At the Bank of Japan Haruhiko Kuroda, the new governor appointed by the stimulus-minded prime minister, Shinzo Abe, this week announced a new phase of monetary easing to hit an inflation target of 2%: bond purchases will be stepped up to double the country’s monetary base. The Bank of England’s mandate has been tweaked to allow rates to stay lower longer. Even the European Central Bank (ECB) may be inching …

via Economic Crisis


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