ECB’s Draghi will seek to soothe financial markets at a policy-setting meeting Thursday.
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The global economics team at Bank of America-Merrill Lynch – in a report that argues central banks are not currently capable of responding to a new crisis – calculates that from 2006 to 2009 the five major central banks cut rates by an average of about 350 basis point.The Bank for International Settlements, often called the central banks' bank, fired a warning shot two years ago.Similarly, central banks have been buying up the shop since 2008, when the financial crisis hit and the Great Recession began.This means that central banks such as the Fed, ECB, Bank of England and Bank of Japan are all making noises of varying hawkishness without necessarily having solved their main problem.BofAML economists Ethan Harris and Aditya Bhave go further, saying central banks should prepare for the next recession by keeping the taps open to overshoot their inflation targets, not making do with bumping up close to them.
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