Govts, firms take note: Central banks won't cushion market, economy anymore

Central banks are dead serious about getting out of the business of suppressing volatility, and the process could be approaching critical mass

If governments, companies and markets needed any further reminders that their operating environment is changing, they got it last week. Despite weakening economic momentum and volatile financial markets, a second systemically important central bank, the European Central Bank, reiterated its intention to stop using large liquidity injections to support economic activity and asset prices. The change in this “global factor” is translating into a volatility “regime change” in markets, requires an evolution in investment strategies, and calls for compensating pro-growth policy measures on the part of many individual countries.

The ECB's Oct. 25 announcement that its governing council still intends to