Growth scare overdone in times of great change

COMMENT

It is just over three years since the US sub-prime crisis erupted and the subsequent deleveraging is, as expected, proving to be a long, drawn-out process.

With a number of emergency measures, notably tax relief and distressed security purchases starting to unwind, policymakers and consumers are contemplating the next step. Unfortunately, the gathering of Central Bank alumni at Jackson Hole produced little fresh insight. However, the Federal Reserve’s announcement that it would use the redemption proceeds from distressed securities to buy US treasuries with varying maturities caught markets by surprise. Theoretically, this will depress longer-term yields. It could be useful when inflation becomes a real issue but, with policy rates remai...