From the days of George Soros, central banks seem scared of markets.
Soros challenged the might of the central banks and proved they are vulnerable.
It took coordinated action then to blunt his challenge. Today markets can pressurize
the regulators and get away with it.
Look at India where the RBI stared the other way at a 14 % deficiency in
rainfall( in a rain dependent economy )
and a 30 % and falling saving rate all of which should have an impact on prices
; yet the RBI cut 50 bps bowing to market pressures. Then the market diluted
the transmission channels. Look at the fall in BSE indices and one will see that it is more of
expectations that drive rather than repo rate cuts in an emerging market. The
powerful market lobbied and the taxpayer and the saver holds the 'hot potato'
of a defiant, unreformed economy.
In Europe, markets ask thus for QE and get it. Tall, Teutonic talk by the
Germans are quietly given a go by as ECB bends in to the pleas of the market.
The Greek crisis is itself a 'set up to fail' panacea to ensure the lenders'
markets did not suffer. (the first round, which led no one to anywhere)
Central banks put their soul on
long term policy issues, but benchmark decisions on the basis of short term
data. The Fed and the RBI state that we
are watching the data. So macro-modelling and projections seem to have little
meaning. In the Fed's aggressive
stance again seemed to refocus on data dependency and keeping alive volatility
by the probability of a potential rate hike.
Central banks seem to promote
inefficiencies and foster wealth inequality through their actions.
In the meantime, the meek and the unheard shall wait and wade through volatility to some December announcement. But then if winter comes, can spring be far behind? We shall only serve by waiting.
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