Cen­teral bankers turn to growth mo­men­tum

The Pak Banker - - FRONT PAGE -

In­vestors wor­ried about the risk of a new global re­ces­sion are hop­ing that data over the com­ing week will show that some mo­men­tum re­mains in the world econ­omy, eight years into its slow re­cov­ery from the fi­nan­cial cri­sis.

The Group of 20 economies were un­able to agree on a joint push for new stim­u­lus mea­sures at a meet­ing which ended on Satur­day, turn­ing at­ten­tion in­stead to up­com­ing busi­ness sur­veys from China, Ja­pan, Europe the United States. Cen­tral banks in Europe and Ja­pan may in­ject a lit­tle more stim­u­lus into their economies later in March. But the Fed­eral Re­serve and the Bank of Eng­land look likely to sit tight for now, mean­ing hopes for a pe­riod of calm in the world's volatile fi­nan­cial mar­kets lie largely with the in­di­ca­tors. "It seems eco­nomic data will have to bear the bur­den of sta­bi­liz­ing sen­ti­ment," econ­o­mists at Bar­clays said in a note to clients on Fri­day.

A first read­ing of in­fla­tion in Fe­bru­ary for the euro zone on Mon­day will help shape ex­pec­ta­tions of how much fur­ther below zero the Euro­pean Cen­tral Bank is likely to push its de­posit rate the fol­low­ing week. Euro zone in­fla­tion picked up in Jan­uary but is ex­pected to have fallen back to zero in Fe­bru­ary, ac­cord­ing to a poll of econ­o­mists.

If there is also a weak­en­ing of the monthly pur­chas­ing man­ager in­dexes for Ger­many and other lead­ing euro zone coun­tries, the ECB may con­sider in­creas­ing its bond-buy­ing pro­gram as well as cut­ting rates on March 10. "There is a grow­ing chance that the ECB will do more at its March meet­ing than sim­ply low­er­ing its de­posit rate," Ralph Solveen, an econ­o­mist at Com­merzbank, said.

US pay­rolls fig­ures on Fri­day may help ease fears about the world's big­gest econ­omy, which ap­peared to stum­ble soon af­ter the Fed­eral Re­serve felt con­fi­dent enough to hike in­ter­est rates for the first time in near- ly a decade in De­cem­ber.

Solid US job growth and pay growth are seen as the best an­ti­dote to the up­heaval in global fi­nan­cial mar­kets which has hurt con­fi­dence and even raised ques­tions about whether the United States was head­ing back into re­ces­sion. Mar­kets have turned calmer in re­cent days, helped by stronger-than-ex­pected U.S. in­fla­tion fig­ures. But the im­pact of plung­ing share prices has shaken the con­fi­dence of many house­holds and busi­nesses in rich coun­tries.

Econ­o­mists at Citi have cut their fore­cast for global eco­nomic growth this year to 2.5 per­cent from 2.7 per­cent due to slow­ing ac­tiv­ity in de­vel­oped economies. They said growth could come in below 2 per­cent -- equiv­a­lent to a global re­ces­sion -- be­cause of the chance of weaker growth among emerg­ing economies. Bank of Eng­land Gov­er­nor Mark Car­ney said on Fri­day that the global econ­omy risked be­com­ing "trapped in a low growth, low in­fla­tion, low in­ter­est rate equilibrium."

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