Most central banks have been easing policy since the start of the year and are set to do more, but it still isn’t clear whether that new activism, which has pushed stock markets to record highs, will help the global economy much. Several meet this week to set policy, including the U.S. Federal Reserve, the Bank of Japan and Sweden’s Riksbank, which all have turned to government bond purchases as stimulus after running out of interest rates to cut.
Yet recent easing — and the halving of oil prices, which was meant to be a windfall for consumers — have not changed the global outlook much, according to Reuters polls of hundreds of economists published last week. The Fed shut its quantitative easing (QE) program just over six months ago. But it seems likely it will be forced to wait until later this year, instead of June as was expected a short time ago, before raising rates from record lows.
A disappointing start to the year from another punishing winter and trade disruption at West Coast ports, together with a rally in the dollar that is now restraining inflation and U.S. exports, is chiming a familiar refrain: low rates for longer. Few expect the Fed to use its two-day meeting as a launching pad for what will eventually be the first interest rate hike in nearly a decade. Wages and inflation still are not rising significantly and even hiring has had a setback.