Over the last several days, fears have grown that the world’s central banks were going on strike.
China was letting overnight liquidity dry up.
Bernanke was signaling that the march towards the exit would begin.
The Bank for International Settlements (the central bankers central bank) said in its annual report that the age of excessively easy monetary policy had to come to an end, and that it was time for fiscal authorities and governments to do their part to fix the economy.
But today we’re getting reminders that central banks are still here.
The People’s Bank of China came out with a statement indicating that would ease liquidity concerns.
And this morning, ECB executive board member Benoît Cœuré gave a speech in which he said this line:
Let me state quite clearly that I do not intend to drop any hints about a change in the monetary policy stance in the euro area in the near future. A reversal would not be warranted by current economic conditions. Economic growth is projected to remain weak this year and inflation is expected to remain clearly below 2% for the euro area as a whole. The various non-standard measures that have been introduced by the ECB to support monetary policy transmission in certain market segments will stay in place as long as necessary, and there are other measures, standard and non-standard, that we can deploy if warranted. Therefore, at the current juncture, there should be no doubts that our “exit” is distant and our monetary policy is and will remain accommodative.
That’s not that specific, but the idea of there being more the ECB can do to ease policy if warranted (which they almost certainly are) is an important message.
Meanwhile, there are more Fed speeches coming up this week, and potentially there will be an opportunity to help soften some of Bernanke’s words from last Wednesday.
So perhaps the strike is over for now.
Markets are liking it. China made a comeback from its lows of the day, and Europe is at its highs of the morning.
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