This is going to be an exciting year for monetary policy. In fact, it already is, thanks to Europe and Japan.
Investors were taken aback the week before last when the Bank of Japan bought fewer bonds and the European Central Bank revealed — shock, horror — its language would have to evolve with the euro region's economy. Both developments, and the reaction, were welcome. They say a lot about the strength of global growth and how it still surprises many people.
First to Japan: Investors were wrong to interpret the reduced purchases as a sign that a policy shift is imminent. They were, however, right about the long-term direction of policy. It isn't going to get looser. Will it remain accommodative as far as the eye can see? Yes. With Japan's economic sunny patch extending and inflation headed in the right direction — if still way too low — it's not a stretch to see BOJ Gov. Haruhiko Kuroda or his successor ease up a little on the stimulus. Just not right now.