Time for innovative international policy cooperation

Washington

"Out of ammo?" The Economist magazine recently asked of monetary policymakers. Economist Stephen Roach has called the move by major central banks - including the Bank of Japan, the European Central Bank and the Bank of Sweden - to negative real (and, in some cases, even nominal) interest rates a "futile" effort that merely sets "the stage for the next crisis". And, at the February G-20 finance ministers meeting, Bank of England governor Mark Carney reportedly called these policies "ultimately a zero-sum game". Have the major advanced economies' central banks - which have borne the burden of sustaining anaemic post-2008 recoveries - really run out of options?

It certainly seems so. Central bank balance sheets have swelled, and policy rates have reached their "near zero" lower bounds. There is plenty of cheap water, it seems, but the horse refuses to drink. With no signs of inflation - and growth still tepid and fragile - many anticipate chronic slow growth, with some even fearing another global recession.