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    Global macro research: policy options in the next downturn

    Global macro research: policy options in the next downturn

    August 31, 2019 Global macro
    Policy options in the next downturn
    A key concern facing central banks is that interest rates are so low there is no room for meaningful cuts to counter a future downturn.

    We examine some alternative policy options that could be used during the next economic downturn.

    • China and the US have policy space, but the next downturn could see major central banks look beyond interest-rate adjustments
    • We outline five of the most likely policy tools that central banks and governments may turn to in future years:
    1. Alternative inflation targets
    2. Modern Monetary Theory
    3. Offsetting negative rates
    4. Macroprudential policies
    5. Yield curve control
    • Of the major central banks, the European Central Bank and the Bank of Japan appear the most limited in terms of future policy options
    • The Federal Reserve and People's Bank of China have considerably more options.

    ECB and BoJ options are very limited versus other major central banks

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