Business Standard

Big stimulus works, but fiscal policy burdened by politics is a problem

For all the pre-pandemic talk about central banks being out of ammunition, ​​​​​​they were able participants in the nascent recovery

Federal Reserve Board building on Constitution Avenue is pictured in Washington. Photo: Reuters
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The Federal Reserve took the lead, rapidly slashing interest rates to zero and reviving quantitative easing.

Daniel Moss | Bloomberg
If the global financial crisis taught economic policy makers anything, it was go early and go hard. The cost of hesitating proved too great. Now the world’s most powerful central banks have expanded bond purchases to about $17 trillion — equivalent to the gross domestic product of China and the U.K. combined — to keep borrowing costs low and boost Covid-ravaged economies. This helped prevent a health emergency from morphing into a financial meltdown. But with growth reviving and vaccines in the works, officials from Washington to Wellington now face an unexpected consequence: They may have been too successful for

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First Published: Dec 31 2020 | 8:35 AM IST

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