The lack of real progress in output and inflation across the globe despite excessive policy accommodation is worrying markets. Fed is yet to hike rates after its first hike in December 2015 while Bank of Japan and ECB are pumping in close to USD 150 billion a month through asset purchases even as they keep rates at negative. However, latest economic data, while not showing high stress on growth is yet to reflect the eight year monetary easing cycle of central banks.
The question is, how long will easing continue and what can be done to transmit the easing into the real economy? Apart from central bankers calling for fiscal stimulus, which is difficult for highly indebted nations, there are no real answers to this question.
Markets can run out of steam given that bond yields are at record lows and equities are at close to record highs. Answers now or more patience?