With the economy taking a hit due to the coronavirus pandemic, most central banks globally resorted to enacting various Quantitative Easing (QE) measures to salvage the situation. However, leading economies used the measure to pump historic amounts of money into their crashing economies.
According to data acquired by Finbold, between January 2020 and November 2021, four major central banks expanded their Quantitative Easing programs by a total of $9 trillion to support their economies. The United States Federal Reserve and the European Central Banks each accounted for $3.4 trillion during the period. The Bank of Japan ranks third at $1.6 trillion, followed by the Bank of England at $0.6 trillion.
Elsewhere, the balance sheet of the Federal Reserve, European Central Banks, Bank of Japan and Bank of England surged 60.13% between 2019 and 2021 from $15.5 trillion to $24.5 trillion. Over the last eight years, the banks’ lowest cumulative balance sheet was in 2014 at $10.4 trillion.
Inflation and printing of more money
With the monetary policy emerging as a possible cushion to the economy, it has, however, resulted in potential adverse effects, as highlighted by the report. According to the research report:
“Notably, printing money has several shortcomings, with inflation remaining the most significant concern, especially if the economic output fails to support demand. For instance, the United States is currently grappling with skyrocketing inflation that has hit 6.1%, the highest in almost three decades. Most economists project that inflation will keep soaring due to the monetary policy adopted amid the pandemic.”
Pumping more money into the economy amid the pandemic was considered a last resort measure because the countries risked further crashes. Most central banks decided on the amount to inject into the economy based on factors like financial stability, inflation level, stability of the exchange rates, among others.
HedgeThink.com is the fund industry’s leading news, research and analysis source for individual and institutional accredited investors and professionals
