In our view, the tightening of global monetary policy in the coming years need not be all that substantial. This is largely because equilibrium interest rates have fallen a long way in the past few decades, which in turn means that central banks will not need to raise policy rates very far. In addition, they are likely to tread carefully in reducing the size of their balance sheets.
This Focus is an expanded version of a presentation given at the Capital Economics Annual Conference, “Ten years after the financial crisis: Is the global economy finally back to health?” held in London, Amsterdam, Stockholm and Zurich in October 2017.
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