Weekly Economic Briefing

Contingent normalisation

21 March 2017

Global Overview

  • Many of the major central banks have taken steps to either further normalise monetary policy, or at least give a nod to the normalisation to come. There is little to fear from these adjustments as long as policy remains state- contingent.
  • The Fed lifted its policy rate another 25 basis points and though the communication around the hike was soothing, there is little doubt that officials think that a less accommodative monetary stance is desirable.
  • After the lending facility rate was increased again Chinese policy is also on a tightening path, though this was done as much to lean against domestic overheating as to follow the Fed. By choosing to tighten via this tool, the PBOC is asserting greater independence over the central government.
  • Neither the BoE nor the ECB are looking to withdraw accommodation at present. However, the former did nudge expectations among complacent investors last week, while officials at the latter are opening up more about the internal debate about how to exit from unconventional policies.
  • The BoJ is more clearly holding the line as it sees the maintenance and credibility of its yield targeting framework as the key to successful reflation.


The Fed raised interest rates again last week but disappointed those investors anticipating a hawkish tone. Still, there is little doubt that officials think that less accommodative settings are warranted.



The Monetary Policy Committee is becoming increasingly divided, pushing markets to price in the possibility of tightening in the not-too-distant future.



Debate about the start date and order of ECB policy normalisation abounds. We assess the implications of different inflation paths on the likely approach.


Japan & Developed Asia

External factors are pushing prices higher in Japan but the preconditions for the Bank to consider reducing policy support remain distant.


Emerging Markets

The PBOC followed the Fed with a lending facility, not policy, rate hike. Reliance on liquidity tools gives the PBOC some independence, but the impact on the real economy is still unknown.


Standard Life Investments’ Global Strategy team provide regular analysis of the key economic data that has been influencing financial markets.

Available on a weekly basis, the Weekly Economic Briefing takes a detailed look at the global economic issues that have been impacting our investment strategy. The regional approach aims to provide an easy-to-navigate guide to the most recent developments in the global economy.

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