Status Of Continued Unconventional Monetary Policy Tools

By January 13, 2020 18:36

Status Of Continued Unconventional Monetary Policy Tools

A little over a decade has passed since the 2008 global financial crisis, and central banks continue to apply unconventional monetary policy tools in their effort to maintain economic stability amid slowing growth. Quantitative easing (QE) alongside a now all-too-common negative interest rate offered by key central banks is beginning to highlight the possibility that depositors may end up footing the bill as banks find their earnings squeezed from longer than expected low rate environments. Even the most counter-intuitive benefits, the likes of negative-interest rates on mortgages, might not swing enough demand to offset soaring fixed-asset prices against stagnant wages. Cyclical recession fears are on the rise, and the US administration’s deregulation plans are paving the way for major banks and money market makers to eye risky investments, akin to assets held in 2008, in search of better yields. Gold has made its return to the stage, but millennials overtaking the global ageing workforce might seek different investment opportunities, having become accustomed to tech, not tradition — apps, not advisors. Meanwhile, cash restrictions, capital controls, suffocating AML oversight demands, bail-in prospects and low deposit guarantees, put households and larger depositors in riskier positions. This is a result of increasing vulnerability among banks as revenues and profits take significant hits in the never-ending cycle of excess liquidity charges. In the following series we will unpack the effects of these Central Bank policies on the global financial system.

By January 13, 2020 18:36


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January 2020