Central Banks Face Power Limit As Debt Persists, BIS Says

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http://www.bloomberg.com/news/2012-06-24/central-banks-face-limits-of-powers-as-debt-persists-bis-says.html

Central banks in developed nations are confronting the limits of their ability to aid economic recovery as government efforts to strengthen their finances fall short, the Bank for International Settlements said.

“Central banks are being cornered into prolonging monetary stimulus as governments drag their feet and adjustment is delayed,” the Basel, Switzerland-based BIS said in its annual report, published today. “Both conventionally and unconventionally accommodative monetary policies are palliatives and have their limits.”

European Central Bank President Mario Draghi has indicated that the ECB is close to exhausting its tools after cutting its benchmark rate to a record low and flooding the banking system with cash. Photographer: Hannelore Foerster/Bloomberg
While central banks’ actions were key to limiting damage from the collapse of Lehman Brothers Holdings Inc., interest rates are now “as low as they can go” and debt purchases have swollen central bank balance sheets, the BIS said. European Central Bank President Mario Draghi has indicated that the ECB is close to exhausting its tools after cutting its benchmark rate to a record low and flooding the banking system with cash.

“In the middle of all this we find the overburdened central banks, pushed to use what power they have to contain the damage,” Stephen Cecchetti, BIS economic adviser, said on a conference call. “There are very clear limits to what central banks can do. It’s critical for the health of the global economy to break the vicious cycles and reduce the pressure on central banks.”

[MindMover]

1. If the greedy 1%ers would pass the bottle maybe the rest of us could have a drink....