BIS says “Stop Retarding Economies” with Loose Monetary Policy

by Laura Ehrenberg-Chesler on June 27, 2013

in Economic Indicators,Fed policy,interest rates

Earlier this week the Bank for International Settlements – known as the central bank of central banks – said in its annual report that while low interest rates and extra liquidity from central banks bought time for economies across the globe during the financial crisis, it now needs to end in order to ensure a return to growth.

“….using current monetary policy employed in the Euro zone, the U.K., Japan and the U.S. will not bring about much-needed labor and product market reforms and is a recipe for failure.”  Central banks “must encourage needed adjustments rather than retard them with near zero interest rates and purchases of ever larger quantities of government securities.”

The BIS has “called for reforms by governments to enhance productivity and encourage employment growth”

Perhaps the suggestion by the Federal Reserve last week, that they would contemplate “tapering” their purchases of Treasuries at the end of this year or sometime next, is actually constructive, and an indication of an improving domestic economy.  If we can couple a more measured monetary policy, with less regulation, and a government more friendly to business, the tepid recovery we have been experiencing may turn into the recovery we have been waiting for.

 

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