An important group of economic actors have enjoyed undeserved impunity since the global financial crisis. I do not mean investment bankers, who will no doubt face revived opprobrium when the 10th anniversary of Lehman Brothers’ collapse is marked next month. I mean the central bankers, whose timidity since 2008 has been every bit as costly.
All the big central banks are now tightening or facing firmly in that direction. The US Federal Reserve is shrinking its balance sheet and steadily raising rates. The Bank of England just approved its second rate rise since the bottom. The European Central Bank, far behind the other two in the monetary policy cycle, has nonetheless announced an end to its asset purchase programme this year. Even the Bank of Japan is perceived by markets as at least considering a tilt towards tightening.
There is one fundamental truth about all these shifts: they have come much later than anyone — in particular central bankers themselves — thought they would. When central banks unleashed unprecedented monetary stimulus in late 2008, few expected that 10 years on, monetary policy would still be extremely loose by historical standards.