Most of the central banks of the countries developed has unequivocally confirmed its inclination towardsloosening this week. Thus begins the long analysis of Frederik Ducrozet, Head of Macroeconomic Research at Pictet Wealth Management.
Has the global easing cycle begun?
There Swiss National Bank – writes the expert – “it was the first to make a 25 basis point cut in this cycle; bucking the trend was the Bank of Japan, which raised rates for the first time since 2007. We continue to expect the Federal Reserve, the European Central Bank and the Bank of England to start cutting rates in June. But above all, the debate has begun on the pace and extent of easing cycle”.
USA, spotlight on the FED
As for theUS economy”stands out in terms of stability of the labor market and more solid inflation, increasing the risk that the Fed fails to make the five cuts we have planned for this year. However, we believe that a further normalization of inflation to an acceptable level of “two points and something” would be sufficient for the Fed to start reducing policy tightening in June”.
The scenarios
Ducrozet underlines that central bankers “could now aim for a more neutral position so as not to ease pressure too much and risk a resurgence of inflation. But the neutral rate it is an elusive concept and almost impossible to estimate in real time.” Furthermore – concludes the expert – “the new macro context that central banks will find themselves facing will probably be characterized by the pre-eminence of supply shocks and fiscal and geopolitical risks, resulting in increased uncertainty and macroeconomic volatility”.
