Deutsche Bank Joins Wall Street Questioning Easy Money's Impact

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(Bloomberg) -- Deutsche Bank AG joined Wall Street counterparts in questioning whether the massive monetary stimulus delivered by central banks over the past decade succeeded in spurring economies.

In a report released on Friday, strategists including London-based Jim Reid said that despite negative interest rates and bond-buying across many industrial nations “there is little evidence of systemic improvement in GDP growth or inflation.”

They argued that banks had resisted lending in the wake of the 2008 crisis and so little of the financial stimulus has found its way into economies. That’s despite major central banks now holding between 20 percent and 40 percent of outstanding government bonds.

“We can say that policy makers clearly thought that QE would have a far larger and more immediate impact than it did,” the strategists wrote. “Whether that was because they also suppressed the bank transmission channel or because the healing process simply takes time is still an open question.”

One risk is that banks will only now start deploying the stimulus just as economies accelerate, causing an overheating of inflation in countries where unemployment has fallen, the report said.

Deutsche Bank’s study comes a week since economists at Morgan Stanley and Bank of America Merrill Lynch joined academics in arguing the Federal Reserve’s purchase of long-term Treasury and mortgage debt hadn’t done much to boost the U.S. economy.

©2018 Bloomberg L.P.

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