Are we now in a global tightening cycle?

There is an increasingly common view that we are on the cusp of a global policy tightening cycle. However, while we no longer expect many central banks to loosen policy further, we expect interest rates in many advanced economies to remain at rock-bottom levels for the foreseeable future. Expectations for monetary policy have shifted over the past few months. Financial markets have begun to price in rate hikes by the ECB and the consensus is now for the next policy change in Japan to be a hike. Also, China raised rates just hours after the Fed’s 25bp rate hike was confirmed yesterday. However, we think it is an exaggeration to suggest that a global tightening cycle has begun.