With interest rates still stuck at almost zero, do central banks still hold the keys to reviving sluggish growth? Kirsty Basset looks at the limits of monetary policy.
It's one of the most hotly debated topics in global financial markets. When the U.S. Federal Reserve decides to raise interest rates. And many have a view on when it might - or might not happen. CMC's Michael Hewson says IMF growth downgrades, China and turmoil in emerging markets mean the Fed should hold fire for now. (SOUNDBITE)(English) CMC MARKETS ANALYST MICHAEL HEWSON SAYING: "I would argue that given all of that the Fed would be very unwise to hike in October, I don't think that they will." Near zero interest rates, and $7 trillion of monetary stimulus were seen as necessary in the aftermath of the financial crisis for boosting investment and growth. But in the case of U.S. QE, policymakers aren't sure how much growth it actually produced, and what more it can achieve. (SOUNDBITE)(English) CMC MARKETS ANALYST MICHAEL HEWSON SAYING: "I think it's quite plain to most people that zero interest rates are not working." There is a growing realisation that times have changed for central bankers. The days of adjusting interest rates to boost employment or contain inflation may be gone for good. According to Bank of England Chief Economist Andrew Haldane, central bank practices need "a fairly fundamental" rethink. But in the meantime there may be more quantitative easing in store for both Europe and Japan. Charles Stanley's Jeremy Batstone-Carr. (SOUNDBITE)(English) CHARLES STANLEY CHIEF ECONOMIST JEREMY BATSTONE-CARR SAYING: "The markets are completely obsessed by this and think that the answer in both cases is likely to be yes." And with the latest business surveys across Asia, Europe and the Americas painting an increasingly gloomy picture, there may be calls for central banks to loosen monetary policy even further.