The world’s central banks aren’t moving in harmony just yet, but at least the discord is beginning to fade.
The European Central Bank on Thursday ruled out further interest-rate cuts in a sign that it’s cautiously edging toward an exit from stimulus. Bank of England officials are considering gradually removing accommodation in coming years, though a move is some way off and the assessment will have to take into account the fallout from the country’s messy election outcome. And while Japan’s central bank has no intention of removing stimulus soon, it is said to be re-calibrating communications to acknowledge that it is thinking about how to handle an eventual policy change.
The Federal Reserve remains well ahead of the pack. The U.S. central bank is expected to lift rates for the fourth time this hiking cycle at its June 13-14 meeting and is mapping out a plan for unwinding its $4.5 trillion balance sheet, a process it’s handling gingerly to avoid roiling global markets. China, meantime, has been allowing money markets to tighten as policy makers seek to squeeze leverage from parts of the financial system.
The nascent signs of policy synchronicity in the world’s largest economies come as global growth improves, and despite central banks continuing to undershoot their inflation targets. Labor-market slack is drying up in many places, and world output is expected to expand 3.5 percent this year, according to International Monetary Fund forecasts, up from 3.1 percent in 2016.
Source: Bloomberg Pro Terminal
Junior Trader Stefan Panteleev
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