From the immediate possibility of Britain leaving the European Union to the longer-term consequences of ageing populations, the world's major central banks this week just aren't sure what to do next.
Officials from the United States, Japan, Britain and Switzerland all opted to keep monetary policy unchanged this week as they await the June 23 Brexit vote and try to make better sense of the deep-seated forces shaping their economies. "We are quite uncertain about where rates are heading in the longer term," US Federal Reserve chairman Janet Yellen told reporters on Wednesday, noting that an ageing society and lagging productivity growth suggested borrowing costs should be below historical normal levels.
The lack of action by four of the most prominent central banks fuelled perceptions among investors that monetary policymakers are increasingly at a loss about what to do in the face of a struggling global economy and distorted world financial markets.
That feeling, coupled with worries about the fallout should Britain opt out of the EU, sent world stock prices skidding lower this week and drove bond yields down.
Dr Yellen said the British referendum was a reason why the Federal Open Market Committee chose to hold rates steady on Wednesday. "It is a decision that could have consequences for economic and financial conditions in global financial markets," she said of the British vote.
Japan and Switzerland could potentially see an economically damaging surge in their currencies if Britain elects not to remain in the EU. Swiss National Bank president Thomas Jordan said in a Bloomberg Television interview on Thursday that it's "possible that we'll have turbulences" in reaction to a Brexit. Officials from major central banks could act in global markets to prevent any "exaggerations", he added.
Brexit is not the only uncertainty central bankers are grappling with.
Dr Yellen said the Fed is trying to figure out the best monetary policy setting for an economy that is approaching full employment and where inflation is forecast to rise back to its 2 per cent target.
Since raising rates from near-zero in December, the US central bank has kept policy steady for four straight meetings.
She also pointed to slow productivity growth and ageing societies, in the US and throughout much of the world, that could hold down rates for longer.
Bank of Japan governor Haruhiko Kuroda has even bigger problems to deal with. The BOJ's balance sheet now amounts to more than 80 per cent of gross domestic product, yet Mr Kuroda has made little progress in lifting the country's too-low inflation rate. A more than 15 per cent rise in the yen this year, despite negative interest rates, is compounding his worries.
The BOJ may not have the power to break the economy clear from a deflationary cycle, said Mr Michael Every, head of financial markets research at Rabobank Group in Hong Kong. "They really are in dangerous territory on the exchange- rate front," he said. "If they make any more policy errors or missteps, or they don't jawbone correctly, the real economic damage could be quite significant at a time when the economy is already weak."