Central banks: in analytical mode

As part of an effort to jump-start a U.S. economy slowed to a crawl by the nation's worst housing recession in more than 15 years, the Fed has cut short-term interest rates by 325 basis points to 2%. Further, in conjunction with the Fed action, and to stave off a potential regional and global slowdown, the Bank of England has cut its key rate three times to 5%. Meanwhile, the ECB has kept its key rate the same, at 4%.

Further, Wang said the central banks will now shift to the analytical mode, as they await data on job growth and prices. The fundamental shifts that have already taken place in the global economy with regard to manufacturing and commodities suggest that the U.S. slowdown / recession will not result in as many lay-offs as previous economic troughs, but above-normal inflation, due to higher commodity prices, primarily oil, he said. As the above suggests, consumer demand could rebound quicker, putting pressure on prices, and the Fed / other central banks have to anticipate that potential problem, hence the rate cut pause, Wang said.

And if the U.S. / global economy does not continue to recover in the months ahead?

"Then the central banks go to 'Plan B,' " Wang said. "That would involve a resumption of rate cuts, most likely this time involving the ECB, too."