By James Saft
(Reuters) – Put away the sunblock and beach towels, for central bankers this is going to be yet another summer of extraordinary measures.
Major central banks around the world, struggling with low growth and sagging inflation, seem to be moving towards joining their peers at the Bank of Japan in considering even more radical measures to stimulate growth.
The European Central Bank on Thursday cut interest rates and threw out broad hints about a range of unconventional measures it may pursue, without committing to anything specific. Europe’s central bank also cut its main interest rate by 25 basis points to 0.50 percent and lopped a half a percentage point off of its marginal lending facility, taking it to 1 percent.
On Wednesday the Federal Reserve kept rates on hold but inserted a key phrase into its statement which opened the door to increased or decreased bond buying if needed. While the Fed, which is divided on the need for and wisdom of more quantitative easing, or QE, was careful to keep its options open, the significant change was that it was for the first time in recent months discussing the possibility of doing more.
Despite buoyant stock markets and giddy debt markets, the global economy is in a clearly weakened state and getting worse.