As reported by Reuters, 2019 was meant to be the first year in a decade that central banks were going to be taking more cash out of markets than they’ve been putting in, but with China concerns still on the rise, and global growth facing increasing risks, twitchy central banks are set to maintain the status quo for yet another year, and keep their record easing programs in place.
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It will still be a momentous year for markets hooked on cheap money provided by the U.S. Federal Reserve and its counterparts in the euro zone, Britain, Japan and elsewhere. Those four central banks are expected to cut the size of their balance sheets by more than $200 billion.
But China, which last week cut reserve requirement ratios for its banks by 100 basis points, has upended expectations that aggregate global liquidity from central banks will be negative for the first time since 2011.
Its easing means more money will still be going into markets this year from central banks than coming out, said Steve Donzé, senior macro strategist at Pictet Asset Management.
Powell’s comments underline the catch-22 facing policymakers: they want to wean markets off cheap cash, but in the process they risk undermining the asset markets they themselves have pumped up with easy money.
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