Last month, policymakers at the Annual Meetings of the International Monetary Fund and the World Bank Group expressed cautious optimism about the state of the international economy and predicted continued growth around the world.
The role of the Federal Reserve has transformed in the past decade, as it has deployed trillions of dollars to boost the U.S. economy while expanding its regulatory oversight of the nation’s financial system.
The share of Treasuries held by official investors—foreign central bank reserve managers as well as the Fed—has been going down in recent years. But the share of Eurozone bonds held by official investors is soaring, and could now be approaching 50 percent of central government debt. With the ECB holding a rising share of a shrinking stock, there aren't enough German bunds around to meet reserve demand.
The world would be in a better place today if the ECB and BoJ had joined the Fed in quantitative easing early on. Their lag in easing contributed to the policy gap that led to the dollar's large 2014 appreciation.