New | Major economies will be saddled with ultra low rates for years

Global markets are digging themselves into a deep hole. Sheer panic seems to be setting in over the spectre of world economic slowdown, chronic deflation worries and financial markets caught in a tail-spin. 2016 is shaping up as another painful phase of the seven-year-old global financial crisis.

The trouble is that global policymakers seem to be running out of fresh ideas to deal with this new leg of contagion. The major central banks have already deployed most of their monetary armoury in dealing with successive waves of the crisis since 2008.

Global central banks are close to running on empty. Interest rates have been slashed to rock bottom levels and a tonne of quantitative easing has already been thrown into the monetary reflation pile.

There is one very obvious clue to what happens next. Interest rates either need to go a lot lower or else the QE generators need to get cranked up again. The implication for markets is that the major economies will be saddled with ultra low rates for years.

It is causing mayhem for monetary policymaking and forcing rushed decisions. The European Central Bank is already setting the stage for another likely deposit rate cut in March, which will push euro zone rates even deeper into negative territory.

The Bank of England is also having second thoughts about monetary policy tightening and looks set to postpone a well-flagged plan to hike UK interest rates until at least 2017. The central bank believes the UK economic outlook is too fragile to sustain higher rates at this stage.