Are the ECB and the Bank of Japan the only central banks not to end their expansionary monetary policy?
The euro zone and Japan have a characteristic that neither the United States nor the United Kingdom has : despite the highly expansionary monetary policies, core inflation remains very low. This suggests that the ECB and the Bank of Japan will maintain an expansionary monetary policy for a long time while the Federal Reserve and the Bank of England will exit this policy. This is an important change: today, all the major central banks are conducting a highly expansionary monetary policy, and there can be no “flight from money”: savers have no incentive to switch from one currency to another. But what happens if this homogeneity of monetary policies disappears? If it is for a short period of time, a temporary depreciation of the euro and the yen against the dollar, then a renewed appreciation with the negative impact on the dollar’s exchange rate from the United States’ structural external deficit. But if it is for a long period of time, a more drastic process can be triggered with significant capital outflows from the euro zone and Japan.