INSUBCONTINENT EXCLUSIVE:
Slowly, but surely, central banks around the world are unwinding the easy money they spent a decade injecting into the global economy to
fight the fallout from financial crises and recession.
Already this year, the Federal Reserve raised its key interest rate twice and the
European Central Bank declared it would cease buying assets in December
Stung by investors, emerging market central banks such as Turkey and Argentina have tightened monetary policy even more aggressively.
Not
all are turning more restrictive
next in 2018 is sure to be a driver for financial markets, long supported by the flood of cheap cash
Bloomberg Economics took a look at the top central banks
interest rates to keep inflation under wraps, following a decline in unemployment to the lowest levels since 2000
Chairman Jerome Powell and his colleagues have hiked twice so far this year and signaled two more increases in 2018
They have also stressed tolerance for a modest overshoot of their 2 per cent inflation target, after touching the goal for the first time in
six years.
A big question for policy-makers is whether tax cuts and federal spending increases will overheat the economy, fanning inflation
or asset prices, which already look lofty in some sectors
Balanced against those concerns are the benefits of very low unemployment, which is drawing more people into the labor force and giving
workers a raise after years of stagnant wages
bounce back from recent weakness
Escalating trade tensions with the US are topping concerns.
With inflation still short of its goal, those developments will determine how
soon the ECB can raise interest rates
Officials say borrowing costs will stay at record lows at least through the summer of next year, and President Mario Draghi -- who steps
maturing debt holdings to give them more firepower.
BANK OF JAPANThe BOJ is forging on with massive monetary stimulus while its peers chart
a course for policy normalization
economists expect Governor Haruhiko Kuroda to keep his current yield-curve settings in place for the foreseeable future, with the short-term
rate locked at -0.1 per cent and the 10-year bond yield target at 0 per cent
If there is any tweaking, it will most likely be with the 10-year yield
While the BOJ has held onto a guideline of buying around 80 trillion yen of Japanese government bonds a year, the actual level of purchases
Hanging over the outlook is Brexit
A disorderly departure from the European Union could quickly put the BOE back in crisisfighting mode
The biggest issue now is just the uncertainty about the final outcome as the government continues to negotiate both with itself and Brussels
is leaning toward an easing bias with more cuts of reserve-requirement ratios in the pipeline this year
and loosen with the other
It has pledged to use monetary policy tools comprehensively and increase funding supply to smaller firms to support growth and fend off
Yet it also refrained from raising borrowing costs in open market operations in June even as the Fed tightens
The threat of costlier oil fanning consumer prices and, with the output gap closing, inflation risks are rising.
That lends support to calls
the RBI will gradually tighten monetary policy in coming months
The swap markets are pricing in at least two more hikes in the current cycle
consumer inflation is seen accelerating in the second half of this year to as much as three times the official target of 5 percent, putting
more pressure on the central bank to act
reelected president thinks are boosting price gains -- contrary to what most economists believe
the last five years as the central bank has failed to act quickly at times of stress.
