“The beginning of the end? Central banks and their exit policies going into 2018”


On 4 October 2017 the Center for Financial Studies held a panel discussion on the topic: “The beginning of the end? Central banks and their exit policies going into 2018”. Giving their opinions as leading capital markets experts were Dr. Bettina Müller (Deutsche Asset Management), Professor Michael Heise (Allianz SE), Professor Thomas Mayer (Flossbach von Storch Research Institute) and Peter Schaffrik (Royal Bank of Canada). The discussion was moderated by Mark Schrörs (Börsen-Zeitung).

“There will be gross excesses unless there is a change in policy direction, and sooner rather than later,” warns Heise. What we are seeing is crisis policy, although there is no crisis, the Allianz Chief Economist believes. The economy is in a “cyclical acceleration”, amplified by the pro-cyclical policy of the central banks. One day difficulties could emerge and take the markets by surprise, which is why the central banks should act promptly, Heise warns. Müller makes a similar plea for a slow exit: “Now is the chance for the ECB to begin its exit.” She views the timing as ideal, as the markets are stable, growth is high and there are no signs of a recession. However, Mayer described the current economic upturn as “not robust” and therefore believes far stronger growth is necessary before an exit is attempted. The central banks are in “a dilemma”, since the countries’ high debt levels are only made tolerable by the low interest rate environment, Mayer criticises.

Schaffrik, on the other hand, takes a relaxed view of the exit situation and sees “far less need to apply the brakes” in the eurozone. He regards the banking system as a whole as stable and less prone to crisis: “There are just a few countries extreme caution is required; with others it’s just a matter of proceeding with care.” As an example, Schaffrik points to the Fed, which he says is carefully preparing the markets. From a market perspective, Müller endorses increased “forward guidance” and calculated notice of the upcoming measures. Heise would also welcome the ECB giving “cautious notice”. Aside from central bank policy, however, Heise regards the expectations of market participants as a second reason for low interest rates: “There needs to be a change in outlook.”

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