News Flash : Global Central Bank Normalization Would Look Like.
Editor Remarks : Barclays has created the following chart which lays out what "coordinated global renormalization" would look like. It can serve as a benchmark to those keeping tabs on where various central banks are in the current attempt to restore monetary normalcy. As a result of countless failures by central banks to normalize monetary policy over the past 7 years, the market - especially bonds and rates - has become openly cynical and outright skeptical regarding the possibility of a successful renormalization of policy by global central bank. If it goes according to plan “ The synchronized upswing in the global economy continues, supporting sentiment, which thus far has ignored elevated policy uncertainties. Headline inflation is increasing due to stable oil prices, while core inflation rates are mixed” . Taking this thought experiment one step further, what would happen if indeed this time central banks are successful to renormalize monetary policy without leading to a market crash. In that case, Barclays expects three Fed hikes in 2017 and 2018, respectively. The ECB is likely to taper further in 2018 and to start increasing depo rates in parallel (in 2018).