Global Monetary Conditions Monitor: No more rate hikes from the Fed in 2017
By Lars Christensen, Founder & CEO, Markets & Money Advisory
We have today published the second edition of our Global Monetary Conditions Monitor, which covers monetary policy in 25 countries – including inflation forecasts for these countries.
Some of the key messages in the Monitor are the following:
- Despite monetary conditions being broadly neutral in the US it is more likely that the Federal Reserve will undershoot rather than overshoot its 2% inflation target on a 2-3 year horizon. Consequently, we see no need for further rate hikes from the Fed in 2017.
- Given present monetary conditions in the euro zone, we believe that the ECB is on track to deliver on its 2% inflation in the medium-term. However, we are somewhat worried about pressures, particularly from the Bundesbank on the ECB to “normalise” monetary policy.
- Canadian monetary conditions have become excessively tight and the Bank of Canada needs to act to ease monetary policy.
- Monetary conditions in the UK and Sweden have become too easy and both the Riksbank and the Bank of England should gradually move towards a more tight monetary stance.
- Icelandic monetary conditions are far to easy and inflation could be heading towards 4% in the medium-term if monetary conditions are not tightened.
Also watch my comments on our main message in the Monitor below.