Central Banks in expansionary mode

First it was European Central Bank, followed by Federal Reserve Board. These central banks were signaling the need to adopt expansionary monetary policies to address poor economic growth of their countries. Today, Reserve Bank of Australia cut its benchmark cash rate by 25 basis points to 3.25 per cent. Australia too was worried about economic growth.

These actions by central banks were to increase money supply in economies so as to stimulate economic activities.

During this month, we are going to see release of two reports: World Economic Outlook by International Monetary Fund and Macroeconomic Review report by Monetary Authority of Singapore. I am certain that both organisations will be painting less than optimistic outlook of economies.

Central banks were taking pre-emptive strikes at stopping the economic slide. Monetary policies alone will not be sufficient. Governments must also adopt expansionary fiscal policies to encourage growth, such as increasing government spending and reducing government taxes. Looking at fiscal positions of United States and Eurozone countries, this may not be as easy.

So what will future hold? Look out for both reports coming out pretty soon.

Copyright © 2012, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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