Warning: Steep grade ahead.
When the U.S. economic expansion reverses, and when emerging markets start to slip faster, the world’s central banks may not be able to help.
Of course, the next recession may not be another “great recession.” And I’m not predicting it’s imminent. For now the Federal Reserve is continuing to raise interest rates on schedule, and Europe is trimming stimulus while the U.K. and Canada are nudging rates higher. Depending on your perspective, Japan is staying easy or tapering by stealth. But downturns have a way of creeping up on us.
In recent recessions, governments have cut interest rates to keep their economies chugging along, and even have bought bonds to stimulate growth. But central banks don’t have close to enough ammunition to fight another serious slump anytime soon.