The selloff that has roiled the world’s markets for the past week has some investors hoping the central banks will react by loosening interest rates, as the Federal Reserve did after the crashes of October 1987 and September 2001.
But in recent days, Fed Chairman Chairman Ben S. Bernanke, European Central Bank council member Axel Weber and Bank of Japan policy maker Atsushi Mizuno all have indicated they see inflation as a greater risk. The drop won’t deter the Bank of Japan from its policy of “gradual” rate increases, Mizuno said Wednesday, that same day Weber told Bloomberg that “a more significant normalization of monetary policy is needed.” Also Wednesday, Bernanke told the House Budget Committee the Fed was “closely monitoring” the financial markets, and “they seem to be working well, normally.”
Beyond Cash Donations: How New Forms of Giving Are Transforming Not-for-Profit Accounting
Evolving Funding Landscape for Not-for-Profits Not-for-profit organizations are being asked to do more with less,…
Learn More
Policymakers for months had been warning that investors were taking too many risks. “It was an accident waiting to happen,” Willem Buiter, professor at the London School of Economics and a former Bank of England policy maker, told Bloomberg News. “They will monitor it very closely but I don’t think that anyone at the central banks will be tossing and turning in their sleep.”
The gains of the past four years have not been erased by the past week’s losses, Bloomberg notes: the MSCI World Index, which had doubled since March 2003, is still 11 percent above its year-ago level.
