Jeff Horwich: The U.S. Federal Reserve says it will continue holding interest rates down the rest of the year through its "Operation Twist" -- swapping short-term securities for long-term ones. But the economic crisis is global, and ours is not the only central bank that's worried about stoking economic growth.
For the global perspective on central banking, let's bring in the BBC's Andrew Walker. He's in Luxembourg for a meeting of European Finance Ministers. Andrew, hello.
Andrew Walker: Hello there.
Horwich: Which central banks have been the most bold and which ones have been more conservative in responding to the economic crisis?
Walker: The one that really stands out, I supposed, as being particularly bold, is the Bank of England, which has been doing things that are quite similar to what the Fed has been doing: this quantitative easing -- going into the markets, creating new money to buy financial assets, mainly government debt.
The European Central Bank is a little bit more constrained, but it has found ways of doing this kind of thing slightly more indirectly. Long-term lending to commercial banks who have then gone into the markets and used significant amounts of that money to buy the debt of the governments concern.
Horwich: And of course, there's Japan as well, is a critical central bank. What challenges did they face?
Walker: They have more than a decade of weak economic performance, and interest rates that have been very, very low. It's had episodes of going into the markets to buy financial assets and creating more money. It has also been intervening in exchange markets to try and prevent some of the unwelcome rise in the value of the yen.
But I think Japan does raise an interesting question. The limits do seem to suggest that it's not all that effective, beyond a certain point. And one does wonder whether the Fed, the Bank of England, may be reaching those limits themselves.
Horwich: We have a global financial crisis, but each central bank, one would think, is focused principally on what's in the best interest of their particular country, their particular market. Are the various central banks generally pulling in the same direction, or can they actually operate at cross-purposes to one another?
Walker: For the most part, they have been cooperating. They've all been cutting interest rates down to very low levels in the case of Japan, the U.S. and the U.K. And they've also been cooperating by providing swap arrangements, as they're called, so that banks can get indirect access to as many dollars as they need. That, I think, has probably prevented a much worse blowup for some banks than might otherwise have happened.
Horwich: The BBC's Andrew Walker in Luxembourg. Great to talk with you, thanks a lot.
Walker: My pleasure.
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