Unconventional monetary policy
BoE corporate bond purchases off to rapid start
Barely more than two weeks into the 18-month programme, the BoE has already filled more than 10% of its quota; gilt purchases continuing at steady rate
Target2 balance surge not a sign of eurozone ‘stress’ – ECB’s Praet
European Central Bank’s chief economist says €400 billion increase in outstanding euro real-time gross settlement claims is largely due to ECB’s asset purchases, rather than eurozone weakness
ECB paper finds ‘sizeable’ impact from QE
Authors find empirical evidence of various channels through which asset purchases affect the eurozone economy, before testing them in a general equilibrium model
IMF’s Singh urges central banks to beware of collateral impact of policy
Senior economist says asset purchase programmes have drained quality collateral from the system, damaging the economy’s “financial plumbing”
ECB's Mersch cautions against ‘extreme’ policy measures
Central bank cannot fulfil mandate with “mathematical equations”, says Mersch, warning currency can be undermined by “extreme measures”
Unconventional monetary policy should be supported on structural and fiscal fronts – ECB paper
Authors examine the effects of supply- and demand-side policies; results point to “positive synergies” between policies
Riksbank paper looks to medieval Europe for ZLB solution
Idea of a “Gesell tax” on holdings of cash could help central bankers overcome the zero lower bound – an idea already tested by kings in medieval Europe
Monetary expansion: Is the sky the limit?
Unconventional monetary policies in advanced countries have resulted in benefits and costs for the global economy and financial markets. Manuel Sánchez assesses if the benefits are worth the risks.
Helicopters bearing gifts
As QE and negative rates run out of room, helicopter money could be a last resort for overstretched central banks. But its detractors say the cost of its use could be very high
Inflation expectations are part of QE transmission mechanism – BoE paper
Firms’ inflation expectations increase in response to QE, research finds; interventions played ‘modest’ role in stabilising inflation expectations in recent years
Money illusion may not be irrational – BIS paper
Claudio Borio and Anna Zabai suggest people’s attachment to a unit of account is not simply a failure to think in real terms, with implications for the effectiveness of negative rates
IMF staff suggest using tiers if CNB cuts rates below zero
Fund encourages Czech National Bank to prepare for ‘eventual exit’ from exchange rate commitment; suggests negative rates are viable tool but could damage bank profitability
IMF staff warn BoJ against unconventional monetary policies
Fund staff tell Japan to launch even more fiscal and monetary stimulus, but caution against monetisation of the government's debt
Yellen offers helicopter money cautious support
Fed chair says central banks could "legitimately consider" stimulus by financing government spending but only in "extreme" circumstances and with an eye on the many cases where it has gone wrong
Tiberius’s experiences with zero interest rates in 33 AD
Can the European Central Bank learn lessons from the use of zero interest rates by the Romans in 33 AD as they grappled with their own fiscal and monetary crisis?
Outflows during normalisation proportional to earlier inflows, paper warns
Working paper examines the effects unconventional monetary policies in advanced economies had on capital flows in emerging markets, and predict what is to come during normalisation
BoJ sees operational issues dampen negative rate effect
Financial system report says combination of negative rates and QQE is helping push rates lower and prompting portfolio rebalancing, but “several factors” are holding the effects back
Kuroda: Negative rates having ‘visible’ impact on JGB yields
Bank of Japan governor Haruhiko Kuroda says rates are falling across the yield curve, falling negative up to a maturity of “around” 10 years; sees effects spreading in future
Viñals supports negative interest rates in current climate
Financial counsellor believes negative rates are helpful, but there are limits regarding how low they can go and how long they can stay there
Mexican deputy calls for ‘proper consideration’ of peers
Mexican deputy stresses need for improved policy communication between advanced economies and emerging markets
Senior IMF figures support nominal negative rates
Negative nominal interest rates can help deliver additional monetary stimulus, senior figures at the IMF "tentatively" conclude
Visco warns of danger of revising wages down if inflation undershoots predictions
Some Italian contracts will be downwardly revising elements of pay if inflation undershoots expectations, Ignazio Visco says; general adoption of this rule could harm the ECB’s policy
Praet says ECB policy is working
Analysis shows that eurozone finances would be considerably tighter without ECB’s unconventional monetary policy, executive board member says
Eurozone monetary policies ‘virtually exhausted’, Dutch central bank head says
Eurozone monetary policy is “virtually exhausted”, Dutch central bank head warns; structural reforms are needed to restore growth rates