WASHINGTON (AP) — The world's central banks are under pressure to do something about slumping economies and panicky stock markets.
The question is, can — or will — they do much that would help?
The head of the European Central Bank signaled this week that there's "no limit" to how far the ECB would go to restore the health of the continent's fragile economy.
The Bank of Japan is considering expanding its easy-money policies as soon as next week to fight feeble growth and dangerously low inflation.
And, in the view of many economists, the Federal Reserve may have to rethink its plans to slowly but steadily raise U.S. interest rates. The Fed meets next week.
"Everything is going South," says former Fed official Joseph Gagnon, senior fellow at the Peterson Institute for International Economics. "I predict (the Fed) will not be raising rates in the next few meetings — and maybe not in the first half of the year."
So far, the global economy has benefited modestly at best from the cures central banks have offered. The World Bank and the International Monetary Fund this month once again downgraded their outlook for the global economy. Like other analysts, they have persistently overestimated the strength of the worldwide recovery from the Great Recession despite the extraordinary efforts of major central banks.
Around the world, stock markets have been pounded for weeks, in large part by fear and uncertainty over a decelerating Chinese economy, the world's second-biggest and long a vital source of global strength.
China's slowdown has hammered the countries that have supplied it with coal, copper and other raw materials. The currencies of those countries have, in turn, tumbled. Oil prices this week hit a 12-year low of $28.15 a barrel before rebounding a bit.
At this week's ECB's meeting, President Mario Draghi warned that plunging oil prices heightened the risk that inflation would stay well below the central bank's 2 percent target. He said the ECB was poised to expand its existing stimulus efforts at its next meeting.
The rate the ECB pays banks for deposits is already negative 0.3 percent. By making banks pay to keep their money at the central bank, it tries to pressure them to use their money to lend to businesses and consumers instead.
The ECB chose not to expand a 1.5 trillion-euro ($1.6 trillion) stimulus program. Under that program, the ECB buys bonds, thereby pumping money into the financial system. The idea is to lower lending rates and encourage borrowing and spending.
The bond purchases are also supposed to lift prices and raise inflation from dangerously low levels. Too-low inflation can hurt an economy by making debts costlier to repay and by discouraging spending because goods and services are expected to become even less expensive later.
Draghi said it would "be necessary to review and possibly reconsider our monetary policy stance at our next meeting in early March."
Other central banks are trying to juice growth, too. The People's Bank of China has cut interest rates six times since November 2014 to try to cushion the Chinese slowdown.
When the Bank of Japan meets next week, it will face pressure to expand a bond-buying program that's been meant to keep rates low, lift low inflation and juice the economy.
"The odds of action next week are close to 50-50," economists at BNP Paribas wrote, "and developments in the market over the next week could make the BOJ feel obliged to ease."
The Fed is moving in the reverse direction. In December, it raised the short-term rate it controls from record lows, a response to a strengthening job market and low unemployment. The Fed had been expected to raise rates several more times this year.
But the turmoil in global markets may have changed things. For one thing, rising U.S. rates and the healthy American economy have attracted investment to the United States and raised the dollar's value. A stronger dollar squeezes U.S. companies — and the economy — by making U.S. exports pricier in foreign markets.
Those who backed the Fed rate hike "don't understand that the huge increase in the U.S. dollar was an effective monetary tightening," says Brian Bethune, an economist at Tufts University.
The Bank of England was expected to raise rates, too. But this week, Mark Carney, head of the central bank, said "now is not the time to raise rates."
The Bank of England is nowhere near meeting its 2 percent inflation target even though it's kept rates at a record low since 2009 and introduced a bond-buying program to try to ease long-term loan rates.
Some analysts argue that central banks can't do much more. They've already cut short-term rates to record lows and made massive bond purchases to reduce long-term borrowing rates.
The biggest troubles facing the world economy may lie beyond their reach. China must make a difficult transition away from wasteful investment toward slower but sturdier growth built on consumer spending. And most wealthy countries are contending with aging workforces.
Draghi acknowledged that weakening global conditions would make it hard for the ECB to meet its 2 percent inflation target.
"Is this a good reason to give up?" he asked. "No, it's not a good reason to give up ... We don't give up."
AP Business Writer David McHugh in Frankfurt contributed to this report.
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