Keeping Up with the Fed

Summary from an interesting piece by Koichi Hamada on FED's aggressive monetary easing:

As the US - FED continues to pump liquidity as part of infinite Quantitative Easing(QE) into the global markets using unconventional instruments along with interest rates at zero lower bound, the European Central Bank has also ramped up with bond purchases. Citing the Japanese experience, Hamada reflects on the potential implications of aggressive monetary policy by the US - FED on currency depreciation of other economies.

Summary

On one hand, the focus of the governments across the globe remains on flattening the curve and planning phased relaxation in lockdown measures. Programs and policies to support businesses and the households are being implemented to mitigate the extent of economic fallout from restrictions in place. But Fed's aggressive liquidity injection measures in the global markets might end up living economies (that have so far managed the crisis effectively) with a limited choice other than monetary easing.

For India, the Reserve Bank of India(RBI) has been proactive in maintaining exchange rate stability with timely interventions in the Forex market but the capital flows still remain volatile along with mounting pressure on domestic futures and Over the Counter (OTC).

Reference

Koichi Hamada (8 May 2020).Keeping Up with the Fed - commentary. Project Syndicate.