Developed country central banks that see quantitative easing as a route to recovery are merely inflating bubbles, driving up the prices of assets held by rich people and failing to deliver growth on the ground. So says Atiur Rahman, governor of the central bank of Bangladesh.
“QE will lead to bubbles and overheating,” he said during a visit to beyondbrics on Friday. “They are creating liquidity in the air and never really touching the ground.” Read more
Investors are often known to buy on the rumour and sell on the fact but on Thursday, following the announcement of the European Central Bank’s €60bn-a-month asset-buying programme, they carried right on buying.
That’s true, at least, of central and eastern European currencies, if you measure them against the freshly-weakened euro. Read more
After building expectations for so long, it will come as a disappointment today if the Eureopean Central Bank does not promise to buy (or have others buy) €50bn’s worth of assets every month for at least the next year.
Assuming Mario Draghi delivers as hoped, what will it mean for EM? Will ECB QE pick up where the US Federal Reserve’s variety left off, floating EM asset prices once again? Beyondbrics has been asking around. Read more
As soon as Ben Bernanke mentioned in late may that the Federal Reserve could soon begin to scale back its bond-buying programmed, hell broke loose in emerging markets.
Stock prices declined, currencies fell and interest rates on sovereign or corporate bonds shot up. For many investors, Bernanke’s comments on May 22 in testimony before the US Congress meant that the easy flows of money that had landed in emerging economies would not only end soon, but worse — would be reversed.
As a result, many financial markets in emerging economies began experiencing some “withdrawal symptoms” even before the Fed had acted.
Press forward. By September, the Fed hadn’t touched its bond-buying programme and suggested instead that it wouldn’t any time soon. Most economists and fund managers by then had figured that the famous tapering would not take place until at least December. Read more