It’s no question that the global economic recovery is gaining momentum as economic activity continues to pick up in most parts of the world, but with that comes mounting pressure for key central banks to withdraw their crisis policies and slow quantitative easing.
Although the European Central Bank (ECB) kept its monetary policy unchanged on Thursday last week, it opted to reduce its pandemic emergency purchase programme (PEPP) over the next three months.
Adriaan Pask, Chief Investment Officer at PSG Wealth, provides the below commentary about how central banks are increasingly moving away from crisis policies.
“Interest rates globally are very low and the only way one can expect them to go is up. Interest rate hikes will likely start in emerging market economies first before developed economies start to hike rates.
Investors can expect to hear more conversations around tapering. As economies recover and asset purchases by central banks come to an end, we believe more clarity will be provided on the possibility of interest rate hikes.”
Key takeouts:
Bank of England’s Governor, Andrew Bailey, believes that current market conditions are conducive for dialling back crisis policies.
The Bank of Canada has already put in motion its plan to reduce bond purchases as it anticipates the economy to strengthen further in the next few months.
In the US, Federal Reserve Chairman Jerome Powell indicated that the central bank is likely to start tapering monetary policies before the end of 2021.
With global economies set to improve further, the Bank of America expects central bank asset purchases in the Eurozone, UK, US, and Japan to fall.
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