Global Economy: Monetary Policy

Our Market Optics chartbook contains data-driven insights that power our portfolio management teams’ views, ideas, and decisions. Each week, we’ll take a closer look at one of the charts.

This week’s topic: Global economy: Monetary policy

global economy monetary policy
  • Policy divergences are increasing. Central banks in countries like New Zealand and Korea are trying to prepare markets for the day when those banks are set to hike rates, which could be this year already. Other central banks, like the European Central Bank (ECB), seem to be doubling down on their commitment to keep rates low—if not lower. The difference is partially due to how confident the central bankers are in the growth and inflation outlook, but it is also likely partially due to those bankers’ concerns (or lack of concern) about their currencies and capital flows.
  • The Federal Reserve seems to fall in the camp with the ECB where it’s in no hurry to hike. It may be tiptoeing toward tapering its asset purchase programs, but a key lesson from the financial crisis is that removing emergency measures does not have to be disruptive to growth or markets if the measures are removed at a measured pace and while the economy is accelerating.

Originally Posted on July 29, 2021 – Chart of the week: Global economy: Monetary policy

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