Free exchange: A new toolkit

摘要

In the late 1990s and early 2000s central bankers in America and Europe had it easy. By raising or lowering the official interest rate, they could stimulate or dampen the economy at will. Rate changes would ripple fairly predictably through the banking system and bond markets, thereby affecting the price of borrowing across the economy. But following the 2008 crash, central banks were forced to pin their official rates to the floor. After five years of holding them near zero, monetary policymakers have become ever more reliant on "unconventional" measures. Two policy tools in particular have become important. The first is making large-scale asset purchases. Since 2009 the Federal Reserve has been buying financial assets including government and corporate debt and pools of household mortgages. Over the same period the Bank of England has purchased £375 billion ($585 billion) of government bonds. The aim in both cases is to push prices up, thereby pushing down the yields, or interest rates, on these assets. This cuts the costs of finance across the economy.