Global Central Banks Ease the Most Since 2009

Here is what I wrote last night

Yet what sets the today’s markets apart from the 2008, Japan’s stagnation and or the Great Depression has been the central bank activism which as I have been reiterating has been navigating on uncharted treacherous waters.

Artificially manipulated interest rate together with money printing results to relative pricing of assets, which all comprises the inflation cycle.

For a little validation of my observations, here’s the latest Bloomberg article with the particulars, (bold emphasis mine)

Central banks across five continents are undertaking the broadest reduction in borrowing costs since 2009 to avert a global economic slump stemming from Europe’s sovereign-debt turmoil.

The U.S., the U.K. and nine other nations, along with the European Central Bank, have bolstered monetary stimulus in the past three months. Six more countries, including Mexico and Sweden, probably will cut benchmark interest rates by the end of March, JPMorgan Chase & Co. forecasts.

With national leaders unable to increase spending or cut taxes, policy makers including Australia’s Glenn Stevens and Israel’s Stanley Fischer are seeking to cushion their economies from Europe’s crisis and U.S. unemployment stuck near 9 percent. Brazil and India are among countries where easing or forgoing higher interest rates runs the risk of exacerbating inflation already higher than desired levels.

“We’ve seen central banks that were hawkish begin to turn dovish” against a “backdrop of austerity” in fiscal policy, said Eric Stein, who co-manages the $6.6 billion Eaton Vance Global Macro Absolute Return Fund in Boston. “You could debate how bad it will be for growth, but it can’t be good,” he said of the challenges facing the world economy.

Global Rate

Monetary easing will push the average worldwide central bank interest rate, weighted for gross domestic product, to 1.79 percent by next June from 2.16 percent in September, the largest drop in two years, according to data and projections from JPMorgan, which tracks 31 central banks. The number of those banks loosening credit is the most since the third quarter of 2009, when 15 institutions cut rates, the data show…

While central banks in Australia and Indonesia have reduced borrowing costs and the Bank of Japan increased asset purchases in October, other countries in Asia may be slower to ease policy.

The People’s Bank of China has raised its main interest rate three times this year to fight inflation. India’s central bank lifted rates on Oct. 25 by a quarter of a percentage point, while signaling it was nearing the end of its record cycle of increases as the economy cooled.

“Most central banks will wait and see how the situation develops in Europe,” said Joseph Tan, Singapore-based chief economist for Asia at Credit Suisse Group AG’s private-banking division. “If we do have a continuation of the political impasse in Europe and that leads to a recession in Europe, and the U.S. economy starts to slow again, then Asian central banks will cut interest rates.”…

Europe’s turmoil has led Australia, Brazil, Denmark, Romania, Serbia, Israel, Indonesia, Georgia and Pakistan to reduce interest rates since late August. Chile, Mexico, Norway, Peru, Poland and Sweden are also forecast by JPMorgan Chase to lower borrowing costs by the end of the first quarter, while Australia, Brazil, Indonesia, Israel and Romania may cut rates further.

In the U.S., Federal Reserve Chairman Ben S. Bernanke is considering further actions to lower borrowing costs in the world’s biggest economy. He vowed in August to keep the benchmark interest rate close to zero through at least mid-2013. The central bank in September decided to replace $400 billion of short-term securities it holds with longer-term debt to reduce rates on extended-maturity debt.

The article doesn't say it but global central bank asset purchases have been unprecedented, although in terms of interest rate rates--yes, they are 2009 lows.

Yet given the above, there will be NO deflation coming as central banks continue to aggressively ease. I even expect more coming from the ECB

On the other hand, prepare for a boom bust cycle in parts of the global economy and nasty inflation ahead.