Our Market Optics chartbook contains data-driven insights that power our portfolio management teams’ views, ideas, and decisions. Each week, we’ll take a look a closer look at one of the charts.

This week’s topic: Global economy: Monetary policy

·         Crisis policies are slowly coming to an end. The Bank of England said it is ready to hike if the economy continues to grow rapidly and inflationary pressures persist. The Federal Reserve has teed up tapering to start as early as November as the committee thinks the economy has made enough progress that it can gradually slow and then stop its massive asset purchases.

·         The Bank of Japan is—as is typical—a bit of an outlier in terms of developed market central banks. It is still worried about deflationary pressures as their economy has struggled to get traction with the various supply chain issues that have held back growth. As supply chain issues slowly clear, their economy could come roaring back, but the Bank of Japan may be shy in removing stimulus.

·         Emerging markets continue to be on the vanguard of hiking. Brazil once again hiked rates to try to tamp down inflation expectations. Turkey is an aberration where its central bank cut rates despite rising inflation. Policy divergences could lead to large market divergences as well.

 

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