Central banks are pulling out all the stops to turn around the global economy.
They’re pumping money into their economies, creating negative interest rates and buying billions of dollars in bonds. Yet experts are worried some of these strategies will not be enough to turn around the slump in the world.
“Major central banks have run out of ammo,” says Ed Yardeni, chief investment strategist at Yardeni Research.
Central bankers are trying to stabilize their economies and currencies as they navigate through the volatility of the global slowdown, market meltdowns and investors pulling cash out.
But many admit they don’t know what to do next.
“The world is an uncertain place, and all monetary policymakers can really be sure of is that what will happen is often different from what we currently expect,” Stanley Fischer, the No. 2 at the U.S. Federal Reserve, said in a recent speech.
Fischer and other central bank leaders are arguably running out of new tools to turn things around. The European Central Bank could buy more bonds in a few weeks to stimulate the continent’s economy but its leaders know that’s not a long-term solution.
“We are ready and able to play our part in the recovery,” ECB board member Benoît Coeuré said in a recent speech. “But for the recovery to become structural…monetary policy does not suffice.”
Amid all the volatility and uncertainty, experts are growing concerned that all these recent moves are merely a short-term boost and they lack a long-term solution.
Many experts argue that Congress and its global counterparts need to step up by providing policies that promote growth, such as spending on projects to build new roads, bridges and railways.
Low interest rates are “making us into drug addicts — we need more and more to achieve the same high. Eventually, we crash and burn without intervention,” says Sharon Stark, fixed income strategist at D.A. Davidson, an investment bank.