And the public spending that put a floor under the pandemic slump is increasingly seen as vital for a sustained recovery too. When it looks like drying up, as it did in the US last week, investors start to worry.
A rare regime-change in economic policy is under way that’s edging central bankers out of the pivotal role they have played for decades.
Fiscal policy, which fell out of fashion as an engine of economic growth during the inflationary 1970s, has been front-and-center in the fight against Covid-19. Governments have subsidized wages, mailed checks to households and guaranteed loans for business. They’ve run up record budget deficits on the way – an approach that economists have gradually come to support, ever since the last big crash in 2008 ushered in a decade of tepid growth.
