FRANKFURT - The global pendulum has swung toward higher interest rates, but its movement is less than smooth, and it looks as if cheap money will remain readily available for much of this year.
Major central banks, anxious to prevent an inflationary spurt, are drawing the curtain upon an extraordinary
era of cheap money.
The United States Federal Reserve is on a steady credit tightening path.
But in the euro zone - the world's second largest economic bloc, where official money costs only 2 per cent - the European Central Bank looked unlikely to start closing the taps before this northern summer, analysts said.
As for the Bank of Japan, it has yet to lay out any strategy for exiting its policy of zero interest rates.
"The case is there for a global rate tightening cycle," said Christel Aranda-Hassel, European economist for Credit Suisse First Boston in London. "But everyone is slightly differentiated in pace. It is a matter of degree rather than direction."
The timing and speed of rate tightening by other major central banks is far from clear.
The Bank of England is taking a breather after a bout of rate tightening last year, and 22 out of 47 economists surveyed by Reuters this week said the British rate tightening had already peaked at 4.75 per cent.
The Bank of Canada has also paused after two rate hikes in September and October, as has the Swiss National Bank.
So even though the global economy posted its best performance in three decades last year, growing at roughly 5 per cent, rate tightening looks set to remain modest.
In a Reuters survey conducted in January, analysts predicted official rates in the Group of Seven top industrial nations would reach an average level of 2.9 per cent by the end of this year.
That would be only a slightly faster pace than the 0.4 percentage points of tightening delivered last for the G7 on average.
- REUTERS
