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Central Banks Likely To Stay Easy In 2015 As Normalcy Is Elusive

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http://www.bloomberg.com/news/2014-12-01/central-banks-likely-to-stay-easy-in-2015-as-normalcy-is-elusive.html

The world’s central bankers could be forgiven for thinking that things are never going to get back to normal. More than six years after the financial crisis plunged the world into recession, monetary policy looks nothing like it did before those events.

Even as economists predict that the U.S. Federal Reserve and Bank of England will finally begin to raise benchmark rates in 2015, the central banks are unlikely to push borrowing costs anywhere near pre-crisis, inflation-fighting levels. And even though the Fed in October ended the bond-buying campaign it undertook when the U.S. economy was weaker, it isn’t shedding the assets it bought. The European Central Bank and Bank of Japan, for their part, are stepping up purchases.

Central bankers know that global growth is shaky, that debt is rising and that they’re getting little help from government fiscal policies, Bloomberg Markets magazine will report in its January issue. Economic progress will again depend on the monetary spigot in the coming year -- as will stock prices, bond yields, commodities demand and currency rates.

“Given the slow and unsteady nature of the recovery, supportive policy remains necessary,” Fed Chair Janet Yellen said on Nov. 7 at a conference of central bankers in Paris. Monetary officials should keep trying extraordinary measures, Yellen argued, especially because fiscal policy today remains “somewhat contractionary.”

As the threat is deflation why would interest rates go to levels to fight "inflation", especially at inflation levels it would possible destroy the banking system...

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"The world’s central bankers could be forgiven for thinking that things are never going to get back to normal."

They are the ones causing the abnormal situation, to save their banker friends I'd guess.

They need to be FORCED to raise interets rates. How that will happen is anyones guess.

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"The world’s central bankers could be forgiven for thinking that things are never going to get back to normal."

They are the ones causing the abnormal situation, to save their banker friends I'd guess.

They need to be FORCED to raise interets rates. How that will happen is anyones guess.

I agree that they be forced at some point. Of course it is impossible to know how and when.

Could we go Japanese? Maybe that would keep IR down for a bit but I just can't see how the whole world can go Japanese all at the same time and for the same sort of duration?

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'normalcy' - this is one of those bloomberg abominations in their headlines like 'seen'...as in 'output seen rising' as an article pre-empting the actual announcement of gdp numbers.

Can we not return to 'normality'?

Sounds like an Americanism. A bit like healthful, wellness, and detrain ( :blink:).

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"The world’s central bankers could be forgiven for thinking that things are never going to get back to normal."

They are the ones causing the abnormal situation, to save their banker friends I'd guess.

They need to be FORCED to raise interets rates. How that will happen is anyones guess.

A run on the sovereign is the Keynesian idiots' greatest fear.

Japanese Prime Minister Shinzo Abe has kept tight-lipped about the yen’s further slide in recent weeks, leading many to wonder if he was happy with the move. But a close economic adviser to Mr. Abe suggested that the yen now isn’t so far from levels the government might consider too weak.

“If it goes to 120 yen [to the U.S. dollar], that will make me think,” Etsuro Honda, one of the architects of Abenomics, said in an interview with The Wall Street Journal.

“Well, maybe levels around 120 are acceptable, but if it weakens as much as to 125, that would make me a bit nervous, make me stop and think, ‘Is this okay?’” he said.

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http://www.independent.co.uk/news/business/comment/satyajit-das-with-rates-at-or-near-zero-central-banks-are-having-a-hard-time-firing-up-their-economies-9896971.html

Central banks have reduced official interest rates to historic lows, often near zero (known as ZIRP or Zero Interest Rate Policy). Long-term bond rates are also at historically low levels.

With interest rates bound at zero, central bankers have turned to quantitative easing (QE), whereby the central bank buys securities, primarily government bonds, to inject liquidity into the financial system.

The balance sheets of major central banks have expanded from around $5trillion to $6trn before 2007-08 to more than $18trn now. In many developed countries, central bank assets now constitute between 20 and 30 per cent of gross domestic product (GDP).

In Japan, following its latest round of QE, the central bank’s balance is slated to reach more than 70 per cent of GDP and new purchases of government bonds are running at about 15 per cent of GDP.

The policies target higher growth and inflation. The premise is that lower interest rates will prompt increased borrowing and expenditure, driving economic activity and employment. Bank lending will increase, with lower mortgage rates encouraging re-financing and boosting the housing sector.

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Normalcy is chosen as it's a word that isn't as clear and obvious as the word normality.

Use the expression return to normality and people might start to realise how crazy and abnormal the situation is that TPTB have managed to create and how far removed it is from commonsense normality.

Wouldn't everyone want a return to normality - and the sooner the better. A return to normalcy seems neither here nor there.

Edited by billybong

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