There is no worse feeling than being taken for granted. Yet, central bankers around the world prance around with pride despite having handed over their most vital weapon, ‘the element of surprise’. In what now feels like the good old days for monetary policy purists, there always used to be a guessing game on among market participants with respect to whether the mood was hawkish or dovish. More than the printing press, this uncertainty is where pure central bank power used to flow from. Now, however, market participants are attuned to central bankers acting in their best interest. ‘We will give you everything but a rate hike’ is the unwritten code for central bankers and inflating asset prices rather than moderating them is the new way to grow.
Torrent infinity
One would like to think that India is a different story but here, too, investors continue to believe that it is the downward room for interest rates that is a trigger rather than higher capacity utilisation in the real economy. The expectation is that animal spirits will rage once interest rates are scraping the bottom of the barrel, like they are in the US, Europe or Japan. In those economies, interest rates have indeed hit the floor but neither growth nor wage inflation has roared back. And along with this lack of inflation, the latest red herring for central bankers is the slowdown in China. With the central bank in China easing as well, this supertanker of liquidity looks unlikely to make a U-turn anytime soon.
It’s a quagmire from which central bankers do not know a way out. But this excessive intervention and lackadaisical approach has Mohamed A El-Erian worried. In his cover interview on page 58, the chief economic advisor at Allianz says that this prolonged unhealthy intervention in the financial markets is unsustainable and could lead to more volatility.
Unlike financial sentiment, which can turn on a dime, the market for personal computers has seen steady erosion. Dell used to dominate the industry by selling directly to customers and that used to be its selling proposition. Find out how it is coping in the current environment.