The ultra-accommodative monetary policies of the US Federal Reserve since the global financial crisis may now be more of a threat than a boon, according to Natixis Global Asset Management.
In a note to investors, Natixis' chief market strategist, David Lafferty, said the side effects of the Fed’s continuing focus on liquidity and low rates were beginning to negatively affect savers, insurers, banks, and pension funds.
“The benefits easily outweighed the side effects from 2008 to 2014; more recently, we’re not so sure," Mr Lafferty said.
“Central banks appear to be creating larger dislocations and deriving less growth from each dollar of quantitative easing or each rate cut."
Mr Lafferty said central banks deserved praise for their initial efforts to stimulate growth after the global financial crisis, but suggested that with the crisis in the past, ongoing intervention “now poses a great risk”.
Globally, confidence in central banks is in decline, as is business confidence, Mr Lafferty said.
Regardless of whether or not the Federal Reserve has alternative strategies for stimulating growth, “continuing the current extraordinary policies with no exit strategy is self-defeating” and officials need to rethink their approach.
“Fed officials have to ask themselves if modestly higher interest rates would demonstrate some confidence in the global economy, boosting capital investment and eventually, productivity,” he said.