Central banks ‘have lost credibility’

Many share markets may be riding higher on hopes of European stimulus this week and overlooking plunging oil prices, and even lower global growth targets, but experts say its time that investors woke up to the fact that central bankers aren’t doing a great job.

The Australian share market rose 0.7 per cent in early trade on Wednesday joining a global rally on expectations that the European Central Bank will announce a 1 trillion bond buying program to help revive economic growth.

Fears about global growth and falling oil prices are being eased by the ECB’s much anticipated announcement of stimulus but market experts are warning investors not to get too excited given last week’s shock decision by the Swiss National Bank (SNB) to ditch its currency peg with the Euro.

“Many central banks will envy SNB for its move last week, as they at least try to regain some control of their destiny, but the conclusion remains: as a group, central banks have lost credibility and when the ECB starts QE this week, the beginning of the end for central banks will be well under way,” said Saxobank chief economist Steen Jakobsen.

“They (central banks) are running out of time – that’s the real real bottom line: SNB ran out of time, ECB runs out of time this week, and Fed/BOJ and BOE ran out of time in 2014.

“What comes now is a new reality – the SNB move was a true paradigm shift – we can no longer look at central banks, the markets and policies of extend-and-pretend in the same light as we did last Wednesday (the day before the SNB move).

Full article: Central banks ‘have lost credibility’ (Sydney Morning Herald)

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