Central Banks Have Limited Ability To Boost Bank Lending; Diminishing Returns

Limits to central bank powers are evident as despite aggressive monetary policy easing, their ability to boost bank lending and hence, economic growth, has been limited, believe Morgan Stanley analysts. Charles Goodhart and team point out in their March 8 “Global Economics” research note that though central banks still have ammunition left, repeated easing initiatives seem to have a diminishing effect on financial markets.

G4 bank lending remained sluggish

Goodhart and colleagues point out that in a world where fiscal policy is constrained by a debt overhang and political issues, monetary policy is the last best hope of a battered and fragile world economy. The analysts note that in the years since the Great Financial Crash, expansionary monetary policies have failed...