ECB policy - it is a big global deal

“While we need to keep an eye on international spillovers, it is not clear whether monetary policy coordination would lead to a superior outcome,” ECB executive board member Cœuré said. “In particular, from a theoretical perspective, it is not clear whether an optimal domestically oriented monetary actually leads to more international spillovers.”

We have one of the largest central banks in the world telling investors that they don't have much impact on exchange rates and global capital flows. This is just too rich.  This is not an issue of policy coordination but a simple fact that the largest central banks will have spill-over effects to the rest of the world. The size of the spill-over is a matter for empirical analysis, but the foundation is that changing policy and rates in the major currencies will impact global lending.

One of the main objectives of central banks is to impact rates and currencies in order to cause greater domestic growth. It is hard to believe that a large central bank would say they do not have international effects. Of course, it seems to be the rule that central banks do not discuss outright exchange rates. What is the talk of currency wars all about other than that central banks have international spill-over effects? In the case of the ECB, their QE program has brought down the euro and was expected to do so. The impact will be greater exports and a jolt to growth.

It is a matter of size. There are only a few central banks which can and will have an impact on international markets. The ECB will be one of them. His argument that there are no global effects is applicable for smaller countries, but the actions of the Fed, ECB, BOJ and Bank of China will have spill-over to the rest of the world. That is why we have to watch them so closely.