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Central bankers pressure governments for stimulus

Updated June 14, 2012 02:29:44

Central bankers worldwide are turning up the heat on their governments for another round of money printing.

Source: The Business | Duration: 3min 8sec

Topics: banking, markets, world-politics, currency, international-financial-crisis, money-and-monetary-policy, united-states, greece, european-union


TICKY FULLERTON, PRESENTER:  Over the past few weeks investors have been hanging on every word from central bankers, hoping for yet another round of money printing. That's caused some wild swings on the markets as expectations rise one day, only to be dashed the next.

But now it seems central bankers have had enough and are turning the heat back onto politicians to get their own houses in order.

Neal Woolrich reports.

NEAL WOOLRICH, REPORTER:  Passing the buck or simply refusing to print more bucks? Either way it seems the chairman of the US Federal Reserve wants Washington to do more heavy lifting to aid the US economy.

BEN BERNANKE, CHAIRMAN, US FEDERAL RESERVE (Thursday):  The main things that Congress could do would be to help strengthen our own economy. The more momentum, the stronger our economy, the better able we would be to withstand the financial spillover from problems in Europe.

NEAL WOOLRICH:  Ben Bernanke's testimony last week snuffed out investor's hopes that the US Federal Reserve was about to embark on more money printing, or QE3. But overnight those hopes were reignited when the president of Chicago's Federal Reserve said he'd support more stimulus if it was needed. It wasn't much, but it was enough to spark yet another rally.

MIKE HAWKINS, CIO, EVANS AND PARTNERS:  Risk aversion in equity markets is higher than it was when Lehmann Brothers went broke in 2008. You know, very similar to where it was in August, September last year. So by definition when the marginal investor is extremely risk averse; the focus is very, very short and the day-to-day volatility markets both ways is very, very high.

STEVEN DOOLEY, HEAD OF RESEARCH, FOREX CAPITAL TRADING:  At the moment we're getting a tussle between these two competing sides: traders that think we're likely to see stimulus and traders that think the major concern is going to be a breakdown in the eurozone.

NEAL WOOLRICH:  For several months markets have been trading on headlines and rumours, but it didn't take long for last week's sugar hit from the 100 billion euro Spanish bank bailout to wear off once investors digested the facts.

Mike Hawkins says markets want Europe to deliver something like the US bank bailout package where authorities drew a line in the sand and said they wouldn't let another major bank fail.

MIKE HAWKINS:  I think if we reflect back on the bank packages we saw in the US and UK, 2008, 2009, they involved equity injections rather than debt injections and debt injections then start to carry implications for government balance sheets as well.

STEVEN DOOLEY:  And it really comes down to the fact whether Germany's willing to write that blank cheque, and our view is of course that the Germans and the European project has so much invested in it, we think the end game will be at some point Germany and the EU will be forced to act in that manner.

NEAL WOOLRICH:  But Steven Dooley is not expecting much from the European summit at the end of the month because European authorities have typically been slow to act in the past.

STEVEN DOOLEY:  So it's likely that the document that comes out at the end of June will be a disappointment to market and we'll continue to muddle through potentially over the next couple of months until we finally see a policy that gets sort of buy-in from all the EU.

NEAL WOOLRICH:  However, a more pressing concern for investors is the Greek election mark two this Sunday. That result is still anyone's guess, meaning the markets are set for several more wild rides yet.