Signs that the ECB is preparing a fresh blast of stimulus have halted the increasingly ominous slide in global equities, but there are fears that the bounce of the last two days may soon fade.
Monetary experts fear that the law of diminishing returns for quantitative easing is setting in and that ever-more extreme measures by central banks are creating insidious new risks.
Axel Weber, the former Bundesbank chief and now head of UBS, said the balance of advantage had already turned negative. “There is a very clear limit to what the ECB can achieve. The problem is that monetary policy has largely run its course,” he said in Davos.
…Mr Weber said the ECB was likely to keep pushing interest rates deeper in negative territory but this could backfire: “There is a big risk that it may actually drive cash out of the economy.”