BBSP Research on why the Swiss National Bank gambit bodes well for central banks

2012-09-20 - BBSP

On September 13, the U.S. Federal Reserve pledged to buy every month a large volume of mortgage securities and keep doing so “until” the American jobs market shows “substantial” improvement. A week before, the European Central Bank’s chairman, Mario Draghi, had unveiled the outline of an expected bond-buying plan. The disclosed measures involve “unlimited”, sterilized purchases of sovereign debt from struggling euro zone countries, in an effort to lower lending rates and tame the euro crisis.

Both announcements are remarkable in form and scope, since they do not fix any limit in time or resources other than the desired outcome. They were deemed by many to open a new chapter in the recent history of central banks policies, showing a determination to come to grips with economic woes through more forceful approaches. Though initially welcomed by the markets, they have also raised concerns about their chances of success....

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