It's the Year of the Dove for Central Banks Hewing to Fed Script

(Bloomberg) -- The Federal Reserve’s dovish turn is being followed worldwide as policy makers across the globe take a breather from raising interest rates amid slowing inflation and economic growth.

The Reserve Bank of India was the boldest as it unexpectedly cut interest rates, but counterparts in the U.K. and Australia also turned more pessimistic.

Here’s our weekly wrap of what’s going on in the world economy.

Following the Fed

The Fed’s decision of last week to put rate hikes on hold set the tone for the world. India’s new central bank chief delivered a cut which will likely be welcomed by Prime Minister Narendra Modi as an election nears. Australian central bank chief Philip Lowe said the outlook there is “more evenly balanced” and his team followed with a slashing of economic growth forecasts. The Bank of England cited Brexit in cutting its growth projections. Officials in the Philippines pared their inflation forecasts and those in Thailand also held, speaking less hawkishly. In Latin America, Brazil’s central bankers signaled politicians would have to cut costs before they can reduce rates and those in Mexico held, citing a litany of risks including peso weakness and global trade tensions. 

Meantime, Japan is about to mark 20 years since it adopted zero rates, a salient warning to others about just how long "extraordinary" monetary settings can last.

It's the Year of the Dove for Central Banks Hewing to Fed Script

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Back at the Fed

Chairman Jerome Powell got to spend his 66th birthday having steak dinner with President Donald Trump, although the outlook for monetary policy was apparently not discussed. The next day, Powell gave a brief speech in which he said “the U.S. economy is now in a good place.” Other officials echoed that position and backed up the decision to take a pause from lifting rates.

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Global Growth’s Winter

Trouble continues to brew all over Europe: Italy’s slump and debts are weighing on the euro-area economy, and manufacturing in the continent’s growth engine is plunging. The region’s executive arm took a dimmer view. Even without Brexit, the British economy faces a huge hurdle with its sluggish productivity. And Venezuela, battling a deepening crisis, could take a lesson from the struggles of Zimbabwe.

It's the Year of the Dove for Central Banks Hewing to Fed Script

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The Two Big Ones

Things aren’t looking much better in the world’s two biggest economies, who remain in dueling position ahead of a key March 1 deadline to reach a trade deal -- even as President Donald Trump says the talks are going well. There’s no Trump-Xi meeting in sight. The U.S. services sector cooled more than expected last month, and things aren’t quite as great as Trump touted in his State of the Union address. A long shot to demonstrate bipartisanship, infrastructure could be the key to the U.S. warding off recession. China’s economic downturn is weighing on global firms, while the glass-half-full take is that consumer spending has held up and the government has a heavy toolbox. Our key global trade indicators are souring further.

It's the Year of the Dove for Central Banks Hewing to Fed Script

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It's the Year of the Dove for Central Banks Hewing to Fed Script

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