St. James's Place News
Central banks loosen the reins
Central banks around the world experienced a busy week with a burst of monetary easing aimed at shoring up the flagging global economy. The People’s Bank of China announced an unexpected cut in the headline lending rate - the second in the space of a month - demonstrating the authority’s resolve to act decisively to alleviate concerns over a Chinese hard landing.
The Bank of England’s Monetary Policy Committee (MPC) kept interest rates on hold at 0.5% but announced that they will buy an additional £50 billion of gilts over the next four months, taking the total size of the QE programme to £375 billion.
Finally, the European Central Bank (ECB) announced a cut of 0.25% in its main refinancing rate - the first reduction since December 2011 - taking it to a record low of 0.75%.
Also in this week's bulletin...
- Whilst confirming that the ECB has taken seriously the recent downturn in indicators of economic activity, the markets reacted poorly to the lack of new liquidity or additional non-standard measures.
- Despite an unexpected cut in its headline lending rate, and with a further round of monetary easing likely to be needed later this year, the role of China’s economy as the engine of long-term global growth appears undiminished.
- Whilst intended to get the recovery back on track and help meet the target inflation rate of 2%, attention is turning to the knock-on affects of further QE and its impact on consumers, particularly savers and those approaching retirement.
View this week's Market Bulletin (PDF), which contains thoughts and opinions of St. James’s Place and our range of investment managers on the key issues affecting investors.
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