Mohamed El-Erian, writing in the the Financial Times (gated – try a search of Google news using the headline, or can be read with a free registration)
After being forced into quite a similar stance, individual central banks will try to implement more differentiated monetary policy approaches
The driver is greater evidence of multispeed economic growth
Bank of England
- Having already stopped its QE operations, the Bank of England will likely come under growing pressure during this year to signal a further reduction in policy accommodation
- To do so by changing its “forward guidance” regarding the maintenance of a floor on interest rates.
- In the process, it will likely be leading western central banks on the “rate normalisation” path starting next year.
Federal Reserve
- Absent a major economic slump, the Fed will complete its full exit from QE by the end of this year.
- It will not be signalling any impending interest rate move in the first part of 2015.
- Will likely strengthen its forward guidance by replacing its simple unemployment threshold with more holistic measures of the labour market and a more explicit inflation floor.
European Central Bank
- The European Central Bank will likely come third in this line-up, led by the BoE at one end and the BoJ at the other.
- It is unlikely to join its American and British counterparts in gradually removing either price or quantity accommodation.
- To do so would strengthen further the single European currency at a time when the eurozone is only modestly existing recession.
- But it will also resist joining Japan as a massive implementer of QE.
- The ECB is likely to opt for some type of “credit easing” as a means of supporting the flow of credit to rationed companies and individuals – an action that will attract significant media attention but is unlikely to dramatically change economic conditions on the ground.
Bank of Japan
- Based on recent signals from Haruhiko Kuroda, its governor, the BoJ may also find that, by the end of this year, it is among the last central banks voluntarily pursuing a hyper-accommodative stance.