Monday 18/11/2019

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Economic outlook 2018

Chief Economist

Ten years after the onset of the financial crisis, the global economy is showing signs of a synchronized recovery. Cyclical economic growth across the board is picking up, trade volumes are growing, corporate profits are on the rise and unemployment is falling.

The combination of extremely loose monetary policy, low commodity prices and neutral fiscal policy is coming to fruition. So far, however, this has not trickled down into clearly rising wage and inflation readings. The major challenge in the years to come will be to remove monetary life support without hampering economic growth and upsetting market psychology. This approach would mean that central banks once again have monetary leeway in the future. In that regard, however, there is no clear trajectory. Nevertheless, monetary policy makers will need to communicate clearly and in a timely manner, move gradually, consider all options and keep central banks’ balance sheets at high levels in the future. In addition, future equilibrium interest rates will be a lot lower than in the past. Nonetheless, this chimes with an increase in financial risks, on financial markets as well as on property markets.

 

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