Monetary efforts entrenched

The era in which major global central banks have sought to remove post-financial crisis monetary stimulus has now officially drawn to a close. This comes with the US Federal Reserve easing its policy rate for the first time since 2008. But the Fed is only the latest in a list of global central banks highlighting downside global economic risks and weaker inflationary pressures.

Global: US real GDP growth cycles
The longest economic expansion for the least growth


Source: IFM Investors, BEA, NBER, Macrobond *expansion start year indicated in brackets

While central bankers have come to realise that monetary policy, particularly at this point in the cycle, needs help, there remains a mixed capability or desire for governments to add material fiscal stimulus, largely due to concerns around public sector debt.

While direct fiscal stimulus is relatively easy, a reform agenda is more politically difficult, less direct and longer term. It is concerning the advanced economies of the world are threatening to “turn Japanese” with regard to a sustained period of very low rates.