Swedish Bank Move Creates a Global Shudder

New York Times ^ | 11 February 2016 | Landon Thomas Jr

[Lorianne]

What if the bazooka is shooting blanks?

Since the financial crisis, it has been gospel for many investors that some combination of actions by central banks — bond buying, bold promises or flirtations with negative interest rates — would be enough to keep the global economy out of recession.

But investors’ distress over the latest volley by a major central bank, the surprise decision on Thursday by the Swedish central bank to lower its short-term rate to minus 0.50 percent from minus 0.35 percent, has heightened fears that brazen actions by central bankers are now making things worse, not better.

Global stock markets sank, the price of oil plunged to a 13-year low and investors fled to safe haven instruments like gold and United States Treasury bills.

Markets generally embrace conviction and run away from indecision — which is what many see in the policy making of some of the large central banks these days.

The Swedish central bank, the Riksbank, for example, has been criticized in the past for prematurely raising rates, and Thursday’s rate cut was opposed by two bank deputies.

[houeto]

Not a single reply? Wow!

[opus1]

‘We will meet in March, and our committee will carefully deliberate about what impact these developments have had,’ she said.

Ah, reassuring words from Old Yellen. Another gift from Obama.