Monetary policy pushing new limits

What a difference a month makes. At the time of our last Global Central Bank Watch, monetary policymakers in advanced economies had taken a cautious but relatively sanguine attitude to the coronavirus and made only small policy changes. Now, they have pulled out just about every stop.
Jennifer McKeown Head of Global Economics Service
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Global Economics Update

How much of the rise in inflation is due to ‘base effects’?

Much of the rise in inflation in major advanced economies from March to May has reflected the fact that prices fell in the same period a year ago. That said, depending on how you measure it, almost half of the jump in inflation in the US and UK over the past three months has reflected a ‘genuine’ pick-up in inflation. For the most part, base effects are unlikely to be a significant driver of inflation in the year ahead.

18 June 2021

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COVID Recovery Monitor

Our Mobility Trackers show that global economic activity is benefitting from the removal of restrictions in advanced economies. Good progress with vaccinations suggests that this trend should continue, albeit with risks around new variants. The story is less positive for EMs, where vaccination has typically been slow. But there are hopeful signs that China could soon be exporting vaccines on a very large scale.

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Recoveries regaining pace after slow start to the year

Global GDP growth slowed sharply in Q1 as most parts of the world grappled with renewed waves of coronavirus. The US and Korea were among the few exceptions where recoveries accelerated. But with global infection numbers now falling, activity seems to be gaining momentum again. The Global Composite PMI rose to its highest level since April 2006 in May. What’s more, our high frequency COVID Mobility Trackers suggest that activity has risen sharply, particularly in Europe, as restrictions have eased. Other than in particular sectors such as motor vehicle production, there is little evidence so far that recent supply shortages are holding back output. But there are growing signs of inflationary pressure around the world, most notably in the US. Fears of higher inflation should prompt numerous central banks in emerging economies – especially in Central & Eastern Europe – to shift towards tighter monetary policy in the coming quarters. But central banks in major DMs will look through higher inflation this year and next.

11 June 2021

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Will vaccine hesitancy prevent economies reopening?

There are signs that countries whose rollouts are advanced have hit something of a limit, with the remaining population now reluctant to be vaccinated. But this will not necessarily prevent economies reopening once the vulnerable are vaccinated. Potential vaccine-resistant strains are the bigger threat. Recent weeks have seen a slowdown in vaccinations in several economies due to a reduction in…

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US pay pressures are the exception, not the norm

While pay growth has risen across the developed economies, in several cases this reflects reduced hours or the fact that a disproportionate number of low paid workers have lost their jobs. There are clear signs of labour shortages in the US, but for now at least it is the exception rather than the norm.

20 May 2021

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Monitoring inflation as economies open up

In this Update, we outline the key data that will help us gauge the evolution of inflationary pressure in advanced economies as they open up. Pandemic-related distortions mean that it is particularly important to understand the detail to distinguish temporary effects from a more sustained rise in price pressures. The new Inflation Dashboard in our data platform CE Interactive allows clients to do just that.

5 May 2021
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