MacroResearchBoard

Does The World Need More Monetary Stimulus? – July 15, 2019

Does The World Need More Monetary Stimulus?

Not really. There are many factors holding back global economic growth in recent years, but restrictive monetary conditions is not one of them. Nevertheless, the monetary backdrop is becoming even more accommodative because the global manufacturing sector is still weak and trade uncertainty has persisted.

An historically wide positive gap between nominal GDP growth and central bank policy rates has coincided with a continued economic expansion and healthy asset price inflation. While there have been several economic slowdowns this decade, including in the past year, the odds of recession are still low unless protectionism worsens. Rather, although current financial market conditions are somewhat overbought, it still seems likely that the backdrop will remain friendly towards continued economic growth and higher real estate and financial asset prices.