Good news for the world economy this morning as the European Central Bank and the People’s Bank of China cut interest rates.
The sad thing is that even though the main ECB policy rate of 0.75 percent is being hailed as a “record low,” it’s still amazingly high relative to the objective situation. Here in the United States we’ve spent years debating the impacts of various kinds of unorthodox monetary policy at the zero bound, but the Europeans have allowed their recession to become substantially worse than ours while still shying away from zero.
As for China, it’s much harder to know what would be appropriate since nobody thinks the official statistics are accurate. Even central bank officials may be making due with very hazy guesstimates.