The dollar tumbled, lifting world shares to their highest level of the year, after the Federal Reserve scales down its own expectations of the number of U.S. rate hikes. As David Pollard reports, it's been a difficult week for central banks around the globe.
What a week for monetary policymakers ... 'No change' from the Bank of England caps seven days that's seen shock easing from New Zealand, the ECB and Norway. And the Swiss National Bank cut its growth and inflation outlooks. The BoJ not easing this time - though more could be in the pipeline... And then of course the Fed: no change there, as Janet Yellen tells the world "caution is appropriate". (SOUNDBITE) (English) COMMERZBANK, GLOBAL FINANCIAL ECONOMIST, PETER DIXON, SAYING: "We've seen some central banks take additional action to pump extra liquidity into the markets in a bid to stimulate inflation ...Those central banks where the economy is perhaps in slightly more robust shape are holding off from taking action, and I think that's going to be the pattern for large parts of this year, given the uncertainty emanating from certain parts of the world." Markets took the Fed decision as a cue for risk to go back on. World shares shooting up to their highest this year - oil and commodities jumping. Where there has been easing: that's added to worries of a race to the bottom for rates and currencies. Though Mario Draghi spooked markets by saying ECB rate cutting might be at an end. And for the euro zone the problem is inflation at below zero. (SOUNDBITE) (English) COMMERZBANK, GLOBAL FINANCIAL ECONOMIST, PETER DIXON, SAYING: "The problem is that there's too much spare capacity in the euro zone, unemployment remains high, and as a consequence wage growth isn't going anywhere." The US dilemma just the opposite - strengthening inflation perhaps keeping rate hikes on the Fed agenda. That in itself a risk for markets as they dial back expectations of more tightening to come.