By debating the size of their balance sheets, central banks are showing for only the second time since 2008 that they may be worrying about our addiction to QE. QE can be credited with unblocking the system in 2009 and keeping it oiled in 2020. But, by prolonging distortions and widening disparities, it looks too-imperfect-a tool to sustain. The road to ‘policy normal’ as gauged by historical standards is likely to be cut off. The frustration for central banks remains that recoveries since 2009 have been largely output driven with insufficient demand inflation to trigger their usual reaction-functions. Maintaining the reflation trade will be predicated to a large extent on further job gains and/or stimulus, especially fiscally. But, with recoveries on track, the opposite looks more likely.
Neil joined the international business of Federated Hermes in August 2009 and provides investment teams with forward-looking economic research, as well as regular thought pieces and newsletters. He adopts top-down methods – macro and market analysis – to identify interest rate and credit value, and sovereign default risk. Neil began his career in 1987 at the Confederation of British Industry (CBI), becoming its youngest ever Head of Economic Policy. He went on to hold a number of senior positions in investment banks – including Director of Bond Research at UBS, Head of Research at Sumitomo International, Global Head of Emerging Markets Research at PaineWebber International, and, most recently, Head of Sovereign Research and Strategy at Mizuho International. Neil has 30 years’ industry experience and earned an MA in Economics in 1986 from Manchester University, having the previous year completed his BSc (Hons), also in Economics, from University College Swansea.