Life becomes easier for the Bank of England (BoE) as the global economy catches up (or down) with it. Wages are rising and unemployment is low, and the picture is similar across many developed market economies in which, like the UK, monetary authorities have launched various attempts at interest rate normalisation.
With the global economy continuing to slump as capital expenditure grinds to a halt, and global inflation remaining low, central banks are starting to reverse course in unison. With weaker global growth, it looks like the central banks have over-tightened via sporadic interest rate hikes and liquidity withdrawal. Indeed, the US Federal Reserve’s (Fed) 2018 quantitative tightening programme now looks to have been extremely premature. The hurdle for central banks to inject further liquidity appears high, but the coordinated dovish strike from the Fed, Reserve Bank of Australia, the European Central Bank and now the BoE suggests markets might soon start to price this in. Forget Brexit – the BoE now looks simply to be in line with everyone else.