Will governments provide a boost?
Of the 23 central banks we monitor, 16 have cut rates since the middle of last year, and 12 of those have set them below inflation (negative ‘real rates’). More extraordinarily, five of them have set rates below zero, including the European Central Bank (ECB), which presides over the world’s third-largest economy. As rates descend toward and even below zero, the impact of cutting them is fading. Central banks need help — and will to a much greater extent when the next recession comes. Fiscal policy could provide that boost, but it might not be forthcoming barring a recession. Although cross-party support is growing for Green New Deals, they’re more of a future hope than a present reality, so low growth and ultra-low rates look set to remain for 2020 at least. Read more about the future of fiscal policy in ‘Looking for fiscal green shoots’, an article in our latest InvestmentInsights.