Central banks appearing to reach limits to their scope for monetary easing - MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that a renewed downturn in crude oil prices and an escalation in global growth concerns would come at a time when investors are seeing more and more signs of central banks appearing to reach limits to their scope for monetary easing.

Key Quotes

“The RBA’s outgoing Governor Stevens was clear in expressing reservations over how much further central bank easing would benefit the economy; the BoJ insists it has more scope for easing but actions at the last policy meeting suggest limited scope for additional easing; the BoE last week confirmed its opposition to negative rates and the main impact of its easing – the Term Funding Scheme – will only be determined by the take-up by banks; and finally the RBNZ yesterday disappointed market expectations with a more modest rate cut.

If crude oil prices were to decline further in September/October and thus raise deflation concerns again, the hit to investor sentiment would be much more severe given it would follow a wave of central bank easing that has highlighted diminishing central bank easing scope.”