Thu Feb 14, 2013, 11:32 AM
Ghost Dog (14,220 posts)
Call them the “whatever-it-takes” central bankers.
As the world’s advanced economies grow at half the speed of the pre-crisis years amid persistently high unemployment, governments are turning to a new set of monetary-policy makers who in word -- and they hope deed -- are more aggressive than their predecessors.
A revolution that began with the arrival in November 2011 of Mario Draghi at the European Central Bank now is gathering speed as Canada’s Mark Carney joins the Bank of England and the Bank of Japan awaits a new governor. The shift could culminate a year from now if Federal Reserve Chairman Ben S. Bernanke is succeeded by someone even bolder. The changing of the guard reflects both a need for central banks to offset fiscal paralysis and a bet that monetary policy remains a potent force. At the same time, investors are increasingly weighing the costs and benefits of quantitative easing, while suggesting too much is expected of central banks.
The appointments of activists “reflect the case that economies are still struggling to sustain solid recoveries and there’s pressure from political quarters to be more stimulative,” said Nathan Sheets, a former adviser to Bernanke and now global head of international economics at Citigroup Inc. in New York. “Central banks have stuff in the bag, but it’s largely untried and may generate unwelcome side effects.” ...
... “Central bankers have begun to redefine what their role is, moving away from inflation targeting toward sustaining the health of the financial system, indeed the wider economy,” said Milligan. “New policy makers may bring in new tools, ones which global investors will need to understand quickly.” ... “What we have now is a monetary problem, so it’s time for a monetary solution,” said Gabay, a former Bank of England official. “It’s tough to make monetary policy effective, but it’s the only way.”
The appeal for governments of appointing activists is that they have run out of room to ease fiscal policy and would prefer that central banks go for growth, even if it means a pickup in prices, said Rob Carnell, chief international economist at ING Group NV in London. Central bankers in some countries already are indicating a willingness to tolerate above-target inflation despite their mandates... “Governments think they don’t need to worry about inflation and wouldn’t even mind if some came along, so they’re putting people in who share that cause,” Carnell said. “It’s all about growth.” ...
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