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Walsh: The Risks of Central Bank Activity

Monetary policies in the U.S., Europe, Japan, and elsewhere carry long-term uncertainty and potential unintended consequences for fixed-income investors, says Western Asset's Steve Walsh.

Jeremy Glaser: I want to ask you a little about Japan. They're now going to double their monetary base during the next two years. Is this a plan that you think can work to kind of pull Japan out of its deflationary spiral, and do you think it could serve a model and we could see even more monetary stimulus from the Fed, from the European Central Bank, or from other developed nations?

Steve Walsh: Yeah. A good question and similar to the question you asked me about, whether the Fed will be able to gracefully back off this. I've talked a lot about the issue and said we favor a little bit more of a bumpy road, but didn't draw any huge conclusion, which I think is difficult for anybody to have a lot of conviction in their ability to discern whether the Fed is going to be able to be effective or not. I think it's similar with the Bank of Japan. This, again, is extraordinarily unprecedented.