The world's central banks are increasingly heading in different directions, underscoring that the gaps in growth that exacerbated the recession will take years to smooth out.
That does not mean a second slump is in the offing, but it does suggest that a sustained global recovery is far off.
Two years ago, leading economies took the unprecedented, emergency step of slashing borrowing costs in lockstep. But now, with a wider divergence between the haves and the have-nots, central banks are locked in an ebb and flow of policy action, reaction and, in some cases, inaction.
"You've still got this two-speed world, what I call the crawling economies and the galloping economies," said Nariman Behravesh, chief economist with IHS Global Insight of Lexington, Mass., one of the world's largest forecasting firms.
"Clearly the appropriate policy in the crawling economies is to err on the side of easing rather than tightening, and especially in those that are running current account deficits, for their currencies to depreciate. In the galloping economies, if anything you want to err on the side of tightening or removing stimulus, and allowing currencies to appreciate.''
Just a day before the Federal Reserve was poised to unveil new measures to boost the U.S. economy, the Reserve Bank of Australia took investors by surprise, lifting its benchmark interest rate Tuesday for the first time in six months. Australia's central bank judged that stopping inflation in its tracks is more important than keeping the Australian dollar from shooting higher against the currencies of countries such as the United States, where borrowing costs are still at record lows.
India's central bank also raised rates, for the sixth time this year, marking the quickest pace of tightening in Asia. Though policy makers said another increase is unlikely in the "immediate future," India is grappling with the second-fastest price increases in the Group of 20.
Those rate hikes - one by a wealthy commodity-producing nation with deep commercial ties to the most coveted markets on the planet; the other by one of those coveted markets, where capital is rushing in and driving up costs - stand in stark contrast to the central bank actions that will fill out the rest of this week.
The Federal Reserve, desperate to spur spending in the world's biggest economy and put a dent in the 9.6-per-cent U.S. unemployment rate, is expected Wednesday to announce plans to buy hundreds of billions of dollars of government bonds, a controversial move designed to push borrowing costs down well into the future. The larger supply of U.S. dollars is expected to further reduce the value of the greenback, which will cause Japan's yen, the euro and Canada's dollar to appreciate.
That means that when the Bank of Japan meets Thursday and Friday in Tokyo, it could also expand its purchases of financial assets to stay in line with the Fed and keep the yen from surging. The European Central Bank, which meets Thursday, may need to keep its benchmark lending rate at 1 per cent for longer than expected in order to keep the euro from spiking. Bank of Canada Governor Mark Carney last month paused his interest-rate-hiking campaign after three consecutive increases, in part because policy makers were anticipating the Fed move.
"You have this dichotomy in the global economy, and then separately within each of the camps you have central banks and governments reacting differently," Mr. Behravesh said.
Still, none of that suggests the efforts to rebalance global growth have been or will be for naught, analysts said. The current precarious juncture of the recovery is a function of some of the forces that need to take hold in order to foster a more lasting, durable global economy, namely Americans spending less and saving more, and governments throughout the developed world attacking their debt loads.
The trouble is that part of the formula is happening too quickly while an equally crucial element - stronger domestic demand in Asian nations such as China - isn't filling the void fast enough just as some of those economies are facing inflation and needing to slow growth.
"I'd rather have some countries strong and some weak than all weak, but at the same time it does illustrate the global imbalances that have existed and that everybody has been talking about for quite a while now," said Eric Lascelles, a macro strategist at TD Securities. "That illustrates more a timing debate, which is, near-term growth equals long-term problems and long-term health equals near-term problems. It's like, let's get the consumer spending, but wait, shouldn't they be deleveraging?" As policy makers such as Mr. Carney have emphasized, the road to a world economy that's less vulnerable to shocks like the financial crisis will be a long one.
"This is something that plays out over years and decades, not months and quarters," Mr. Lascelles said. "We'd better be pretty patient on that. But in the meantime, we need to get a sustainable recovery going again, particularly in the U.S."