Rosenberg: Limits Of Monetary Policy Have Arrived

BlackRock's chief fixed-income strategist says central bank stimulus is facing diminishing returns―or worse.

Senior ETF Analyst
Reviewed by: Sumit Roy
Edited by: Sumit Roy

Central banks have reached the limits of monetary policy. That was the conclusion reached by Jeffrey Rosenberg, managing director and chief fixed income strategist for BlackRock, in his keynote address at the Inside Fixed Income conference in Newport Beach, California on Thursday.

In his talk, aptly titled, "The Limits To Monetary Policy," Rosenberg said that in the wake of the financial crisis in 2008, central banks turned to nontraditional monetary policies―including zero-interest rates and quantitative easing (QE)―with a goal of boosting the value of financial assets (including housing) and increasing consumer confidence and spending.

Those policies were largely successful in their goals. However, by continuing those policies eight years after the crisis, central banks have reached the point of diminishing returns―or worse.

Rosenberg said that when interest rates first fell to these low levels, they encouraged people to save less and spend more. But as rates have stayed low, some people (like retirees) are discovering they have to save more to generate income. That, presumably, can be counterproductive for the economy.

Flattening Yield Curve

Another problem created by nontraditional monetary policies, and particularly negative interest rates, is the resulting flattening of the yield curve. The flatter yield curve hurts financial intermediaries, such as banks, and disincentives them from making loans.

"Much of the post-crisis global monetary policy response has tried an end run around the financial sector. But where that ends up harming intermediation, the results can backfire," explained Rosenberg.

According to him, the Bank of Japan acknowledged this when it abandoned its QQE + negative interest rate policy and replaced it with a QQE + yield curve control policy at its September meeting.

"The shift from the previous policy explicitly acknowledges the limits to monetary policy’s ability to circumvent financial intermediation," said Rosenberg.

Ever since the BoJ shifted gears, yield curves have been steepening, not just in Japan, but around the world.

In the U.S., yield curves may also be steepening due to inflation. According to Rosenberg, there is an inflationary trend emerging in the U.S. economy because inflation expectations are rising. That's why he prefers Treasury inflation-protected securities over nominal Treasurys.

Contact Sumit Roy at [email protected]


Sumit Roy is the senior ETF analyst for, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for, with a particular focus on stock and bond exchange-traded funds.

He is the host of’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays,’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.