Global interest rates likely to diverge sharply

With the world economy gradually recovering, it is tempting to assume that there will be a global monetary policy tightening cycle in the coming years. However, we think US interest rates will return to ‘‘normal’’ levels fairly rapidly after 2015 but those in Japan and the euro-zone will probably remain close to zero for much longer. The resulting divergence in policy rates would be larger than most currently anticipate and could have significant implications for financial markets.