Global monetary policy in action

Left: Bloomberg and Wells Fargo Investment Institute. Quarterly data from January 1, 2007 to June 30, 2022. Fed = Federal Reserve. BOJ = Bank of Japan. ECB = European Central Bank. GDP = gross domestic product.

Right: Bloomberg and Wells Fargo Investment Institute. Monthly data from January 1, 2000 to June 30, 2022. Headline central bank policy rates of selected countries. Refi = refinance. Min = minimum. RMB = Chinese Yuan Renminbi.

Key Takeaways

  • Once-ample liquidity is responding to central banks’ less aggressive monetary policy since the start of the pandemic. Financial stress has climbed to a two-year high, creating increasingly stiff headwinds for credit-sensitive and leveraged parts of the economy.
  • Central-bank stimulus has outpaced that of the Global Financial Crisis in 2008 – 2009, signaling an extended period of adjustment to bring central-bank balance sheets back in line with their historic norms.