Fitch Sees Central Banks Gaining Confidence to Tighten Policy
Central banks will become less cautious about normalizing policy as growth picks up.
(Bloomberg) -- Central banks will become less cautious about normalizing policy as worldwide growth picks up, Fitch Ratings said.
Economists led by Brian Coulton said they expect the U.S. Federal Reserve to hike interest rates no less than seven times by the end of 2019, adding to a global path of policy normalization that could see the European Central Bank laying the ground to end quantitative easing by the end of the year and the Bank of England raising rates by 25 basis points in 2018 despite Brexit.
“Central banks are becoming less cautious about normalizing monetary policy in the face of strong growth and diminishing spare capacity,” Fitch’s Chief Economist Coulton said, adding that diminishing slack should cement the move toward policy tightening.
The normalization is underpinned by strong expansion, with the U.S., the euro area and China all seen growing “well above” trend in 2018, according to Fitch’s forecasts. They predict world output will expand more than 3 percent through 2019, a level not seen since the mid-2000s.
The report comes as the Organization for Economic Cooperation and Development said stable economic growth among the world’s biggest economies at the end of 2017 masked wide variation in performance across countries.
Gross domestic product in the Group of 20 countries grew 1 percent in the three months through December, unchanged from the previous two quarters, the Paris-based OECD said on Wednesday. India grew the most, expanding 1.8 percent, while South Korea was the only nation to see its economy contract.
Finance chiefs of the G-20 will meet in Buenos Aires, Argentina, next week with a U.S. decision to slap import tariffs on steel and aluminum tempering optimism over the state of the global economy. The OECD upgraded its forecast for world growth this year to close to 4 percent on Tuesday, but added the caveat that a trade war could roll back the gains seen in recent years.
--With assistance from Lucy Meakin
To contact the reporters on this story: Marcus Bensasson in Athens at mbensasson@bloomberg.net, Maria Tadeo in Madrid at mtadeo@bloomberg.net.
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Brian Swint, Zoe Schneeweiss
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