Central banks in a number of advanced economies, including the United States, have brought short-term interest rates close to zero, so that further monetary accommodation can be provided only through unconventional tools, such as securities purchases and forward policy guidance. Meanwhile, the scope for fiscal stimulus is limited by concerns about sizable budget deficits and longer-term sustainability.
At the G-20 summit earlier this month in Cannes, the United States and other advanced economies – including France, Germany, Italy, Japan, Spain, and the United Kingdom – agreed to pursue fiscal consolidation plans to place public finances on a sustainable course over the medium term while sustaining the near-term recovery.