FT Alphaville has discussed why western central banks might be in the midst of an existential crisis. The point rests on the fact that traditional policy transmission mechanisms appear to be dying.
Simply speaking, while most western central banks still target unsecured money market rates, the market itself has moved on. Unsecured short-term money market rates are no longer a representation of real financing costs. Trying to influence them thus makes little sense. It can achieve very little. Read more