The central bank monolith is revealed to fracturing. The most evident appearance of that was the Bank of Japan’s recent surprise, where the vote to increase QQE was 5-4. But it has been more than Japan where divergences in policymaker positions are apparent. That includes, of course, the ECB, though not due to the Germany/not-Germany divide that has been a constant presence (only in theory, not actual policy) throughout. Undoubtedly this is a disturbance in the “narrative” about how monetary policy has shaped the “recovery.”
During the past few weeks, officials at the Bank of Japan, Federal Reserveand Bank of England all fractured over just what they should be doing when managing their economies.
That suggests the emerging divergence between international central banks that has been a theme for investors this year can also be seen inside the institutions. It marks a change from the largely all-in unanimity that marked the fight against the financial crisis and the recession in 2008.
The full part of this is the ongoing failure to deliver. Each time a new monetary program is unveiled it has been met with universal optimism to economists and media alike (and “markets”). There is no critical thought or discovery about actual details in efficacy, which is especially disturbing since almost every single instance of a “new” monetarism is the exact same as has been done before. The ECB’s recent covered bond purchase was universally celebrated by media and “markets” alike despite being the third (and smallest) instance of that exact type – you would think somebody somewhere would be curious enough to ask, directly, someone at the ECB why the third time will work where it clearly did not the previous two.