Central Banks Confront a World Where Old Rules No Longer Apply

The Federal Reserve's decision to hold borrowing costs steady for the third consecutive meeting has done little to quiet the debate among economists about whether the era of ultra-low interest rates is truly over, or merely in hibernation. What is clear is that the certainties that once governed global capital flows have dissolved.

Across the Atlantic, the European Central Bank faces a mirror-image crisis: growth is anaemic, inflation is sticky in services, and the political appetite for fiscal stimulus has narrowed sharply following elections in France and Germany. The result is a monetary policy paralysis that is rippling through bond markets from Frankfurt to Tokyo.

In Asia, the Bank of Japan's tentative steps toward policy normalisation have upended decades of carry-trade assumptions. The yen's gyrations have exposed fault lines in leveraged portfolios that institutional investors spent years constructing on the premise of Japanese monetary exceptionalism.