The Federal Reserve announced that it would continue its purchases of assets “until the outlook for the labor market has improved substantially in a context of price stability”; the ECB announced that it would do so “until we see a sustained adjustment in the path of inflation which is consistent with our aim of achieving inflation rates below, but close to, 2 percent over the medium term”; and the Bank of Japan announced that it would continue such purchases “as long as it is necessary for maintaining the 2 percent price stability target in a stable manner.” Such open-ended asset purchases are very effective measures compared with those having specified periods, and they can produce stronger easing effects in terms of the following three points.
The process of fiscal consolidation will place most of the burden of adjustment on monetary policies. In effect, we are likely to have low interest rates globally for much longer than previously thought. These low interest rates will counteract the negative growth impact of the fiscal consolidation.