Outlook We may be running out of policy levers. That is the underlying message from the pronouncements of central banks either side of the Atlantic over the past 36 hours, even if the US Federal Reserve's promise of low interest rates to come for the next two years enabled stock markets the world over to break the cycle of sell-offs yesterday.
Look beyond that promise, however – and really it was a prediction of how sluggish the US economy was likely to be rather than a hard-and-fast commitment – and the Fed did not go as far as many had hoped. There is to be no immediate return to quantitative easing. Note also the split decision, with three members of the Federal Open Market Committee dissenting from the majority view.
It is a similar story in the UK. The Bank of England's latest Inflation Report is only the latest warning that official forecasts for growth this year are going to prove over-optimistic (and many people think the Bank has yet to cut its own predictions far enough). But like their US counterparts, members of the Bank's Monetary Policy Committee have so far chosen not to return to QE. Yesterday, Sir Mervyn King, the Bank's Governor, said another round of easing was possible but warned there were limits to the effectiveness of such a policy. And the MPC is split on the best course of action too.
Why the hesitancy? Well, as Sir Mervyn himself made clear yesterday, the headwinds may prove too strong for monetary policy. Four years to the week since the financial crisis began, we are only just beginning to tackle its origins: the vast borrowing taken on by the world's debtor nations (and by implication the vast lending undertaken by global creditors). The eurozone crisis and the US credit-rating row are just the latest symptoms of those still-to-be-dealt-with imbalances.