Cheap money: Addiction and ‘cold turkey’ risks
April 20, 2015 Editor 0
The U.S. Federal Reserve System has taken new steps toward raising interest rates, but there is a disconnect between what the Fed and markets think will happen. What does it all mean for emerging and developing countries?
Central banks in developed economies have created an environment of ultra-low interest rates to rekindle economic growth and to battle falling inflation. They’re doing this by keeping policy rates close to zero and “printing money” on an unprecedented scale via a veritable alphabet soup of programs, such as QE, CE, LTRO and TLTRO.
These low interest rates have put a lot of pressure on investors, such as pension funds, to generate a decent return, setting off a massive search-for-yield frenzy.
This search for yield has created a cash tsunami that has also rolled on the shores of many emerging and developing economies.
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Categories: World Bank PSD
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