The limits of central bank powers

With interest rates at or close to the zero lower bound, here are a couple of examples of limits to the power of central bankers.

• The Federal Reserve: Will it still cut rates after the strong jobs report?
• The European Central Bank: What are the limits and price of monetary stimulus?

Will the Fed cut rates?
Let us begin with the Fed. After the blow-out Jobs Report, the bond market reacted violently and there were murmurs as to whether the Fed will still cut rates. Let me lay the first concern to rest. Historically, the Fed has telegraphed its interest rate decisions. With the market expectations of at least a quarter-point cut at the next FOMC on July 30-31, the Fed is unlikely to surprise the market.

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