Taking stock of central bank lending facilities

Traditionally, when central banks respond to economic downturns, slashing policy interest rates makes for the headline act. This time, with rates already near zero at the onset of the crisis, rate cuts were only the warmup and, in some cases, didn’t even make the line-up. Instead, policy action by major central banks has in large part come in the form of a growing list of lending facilities.  Many of the schemes – such as the BoJ’s “Special Operations” – are brand new. Some – including the Fed’s Commercial Paper Funding Facility – are GFC-era schemes that have come out of retirement. Other, existing facilities – like the ECB’s TLTROs – have been beefed up.
Simon MacAdam Senior Global Economist
Continue reading

More from Global Economics

Global Economics Update

How much of the rise in inflation is due to ‘base effects’?

Much of the rise in inflation in major advanced economies from March to May has reflected the fact that prices fell in the same period a year ago. That said, depending on how you measure it, almost half of the jump in inflation in the US and UK over the past three months has reflected a ‘genuine’ pick-up in inflation. For the most part, base effects are unlikely to be a significant driver of inflation in the year ahead.

18 June 2021

Global Economics Update

COVID Recovery Monitor

Our Mobility Trackers show that global economic activity is benefitting from the removal of restrictions in advanced economies. Good progress with vaccinations suggests that this trend should continue, albeit with risks around new variants. The story is less positive for EMs, where vaccination has typically been slow. But there are hopeful signs that China could soon be exporting vaccines on a very large scale.

17 June 2021

Global Economics Chart Book

Recoveries regaining pace after slow start to the year

Global GDP growth slowed sharply in Q1 as most parts of the world grappled with renewed waves of coronavirus. The US and Korea were among the few exceptions where recoveries accelerated. But with global infection numbers now falling, activity seems to be gaining momentum again. The Global Composite PMI rose to its highest level since April 2006 in May. What’s more, our high frequency COVID Mobility Trackers suggest that activity has risen sharply, particularly in Europe, as restrictions have eased. Other than in particular sectors such as motor vehicle production, there is little evidence so far that recent supply shortages are holding back output. But there are growing signs of inflationary pressure around the world, most notably in the US. Fears of higher inflation should prompt numerous central banks in emerging economies – especially in Central & Eastern Europe – to shift towards tighter monetary policy in the coming quarters. But central banks in major DMs will look through higher inflation this year and next.

11 June 2021

More from Simon MacAdam

Global Economics Update

G7 tax deal encouraging sign for cooperation among DMs

The direct implications of this weekend’s deal on global corporate taxation struck by G7 finance ministers will be limited. But the deal suggests that wealthy nations have found renewed determination under a Biden presidency to cooperate on global issues, which may pay dividends in other areas in years to come.

7 June 2021

Global Economics Update

How far will rising commodity prices boost inflation?

We think that the broad-based rally in commodity prices will go into reverse later this year, so the upward pressure on inflation in advanced economies should be temporary. But there is a clear risk of a more sustained pick-up in inflation, especially if shortages persist. Drop-In: Great Inflation 2.0 – Are we facing a 70s revival? (1100 ET/1600 BST, Thurs 13th May) A special 20 minute briefing during which Jennifer McKeown, the head of our Global Economics Service, and Senior Global Economist Simon MacAdam will discuss whether advanced economies are in for a repeat of inflation levels last seen during the 1970s. Register here.

12 May 2021

Global Economics Focus

Great Inflation 2.0? Lessons from the 1970s

Policy stimulus and tolerance of inflation by central banks may lead to higher inflation in some G7 countries in the coming years. Given the parallels with the run-up to the high-inflation era of the 1970s, it is natural to be worried about history repeating itself. While we accept that medium-term inflation risks are probably skewed to the upside, the lessons from history suggest that the chances of a Great Inflation 2.0 are low.

29 April 2021
↑ Back to top