Washington, D.C., February 4, 2015 - Divergence in G4 monetary policies has heightened uncertainty and market volatility that will likely persist, if not increase, as political tensions are on the rise, according to the Institute of International Finance's February Capital Markets Monitor.

"The ECB's comprehensive QE program has brought to the fore the challenges posed by the ECB and BoJ easing moves," said Hung Tran, executive managing director at the IIF. "Other countries will either need to match these easing measures, or see their currencies strengthen against the euro and the yen. This fresh wave of QE will prolong a world of plentiful liquidity and zero or negative interest rates more than six years after the financial crisis."

The IIF noted that an unprecedented growing number of countries reported negative nominal interest rates in Q12015. In particular, the European Central Bank, Swiss National Bank and Danish central banks adopted negative deposit rates of -20 to -50 basis points.'

The IIF also cited the most recent currency gyration, reporting that the yen and Euro have weakened by 40% and 10% respectively versus the USD since the BoJ and ECB discussed QE in earnest (in late 2012 and November 2014).'

The IIF said that the most important channel of transmission for extraordinary monetary policy has been via lifting asset values, both through the liquidity effect and by lowering the rates used to discount future streams of earnings.'  Since the Fed began the first round of QE, the U.S. equity market measured by the S&P500 has gained over 200%.

The IIF said that extraordinary monetary accommodation is still needed to revive persistently low growth and low/negative inflation.'  It said that the longer this goes on, the more asset prices become over-valued and vulnerable to correction.

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The Institute of International Finance is the global association of the financial industry, with close to 500 members from 70 countries. Its mission is to support the financial industry in the prudent management of risks; to develop sound industry practices; and to advocate for regulatory, financial and economic policies that are in the broad interests of its members and foster global financial stability and sustainable economic growth. Within its membership IIF counts commercial and investment banks, asset managers, insurance companies, sovereign wealth funds, hedge funds, central banks and development banks. For more information visit www.iif.com.