Monday, August 15, 2016

Monetary easing world-wide and more on the way

In response to Brexit, the Bank of England has already eased, not tightened, credit with more likely to follow. The European Central Bank is also likely to pump out more money as is the Bank of Japan as part of a new $268 billion stimulus package. Meanwhile, even though Fed Chairwoman Yellen has talked about raising interest rates later this year, we continue to believe that the next Fed move will be to reduce them.

Major central banks have already driven their reference rates to essentially zero and now negative in Japan and Europe while quantitative easing exploded their assets. The Bank of England immediately after Brexit moved to increase the funds available for lending by UK banks by $200 billion. Earlier, on June 30, BOE chief Mark Carney said that the central bank would need to cut rates “over the summer” and hinted at a revival of QE that the BOE ended in July 2012.

via John Mauldin, Forbes