Global tightening cycle completed, growth slowed, according to Reuters survey

BENGALURU (Reuters) – According to a majority of economists polled by Reuters, major central banks have put in place a tightening policy.

Although this is widely reflected in the bond markets, as major sovereign bond yields have fallen this year, global equities have rallied and the S & P 500 index has almost reached an all-time high after its best start. Year for more than three decades.

A striking finding of the latest surveys of more than 500 economists around the world, covering more than 40 economies, has not been to soften the economic outlook, but to turn away from long-held optimistic views.

Economists who responded to another question were divided over whether a more severe global economic downturn was more likely than a synchronized rebound, but this year's growth prospects were degraded or remained unchanged for 38 of countries surveyed.

"The recent weakness in global growth will persist much longer than expected. A slew of central banks and stimulus in China will not be enough to boost global GDP growth from its slow pace, "said Jennifer McKeown, director of the global economy. at Capital Economics.

"A disappointing economic performance will leave inflation very low and lead to a general easing of monetary policy. But we do not see this prompting a significant recovery until 2021. "

Global growth is expected to average 3.4% this year, its lowest level since voting began in 2019, almost two years ago. The most optimistic forecast was also more modest than at the beginning of the year.

The forecast for 2020 was 3.4%, the lowest since Reuters began conducting surveys.

However, the consensus of 2019 was slightly higher than that of 3.3% presented by the International Monetary Fund.

The risk of an escalation of the US-China trade war and the prospects of a British exit from the European Union without agreement – two of the most significant threats that initially caused the current slowdown – have have been relaxed.

Yet most major central banks have suggested that growth rates are no longer on the rise and nearly 60% of the more than 200 economists who answered a separate question said they were confident that the tightening cycle world was over.

On Thursday, the Bank of Japan dispelled any doubts about its commitment to ultra-loose policies and the Swedish central bank said that a rise in interest rates expected would arrive a little later than expected.

The US Federal Reserve has finished raising rates at least until the end of next year, with about a third of economists surveyed predicting at least a reduction in rates by that point.

As economic growth in the eurozone and the prospects for inflation have narrowed, the European Central Bank may have missed its opportunity to raise rates before the next slowdown.

"The ECB attributes the weakness of the eurozone to the slowdown in China and concerns over the trade war. In the meantime, the Fed has put its finger on Europe and China, the main obstacles to US growth. But as everyone is looking for a scapegoat on the other side of the border, it's inevitable that someone will monitor the wrong space, "said Elwin de Groot, head of macro strategy at Rabobank.

"One could badume that central banks are pointing fingers simply because they have little confidence in the effectiveness of their actions."

Growth forecasts of developed economies – including Germany, France, Italy, Spain, the United Kingdom, Japan, Australia, the United States and the United States. Canada – for this year and the following year have weakened.

This was not much different for emerging market economies, despite the efforts of policymakers to stimulate sluggish growth.

Economic growth in the major economies of Asia, Africa and Latin America would lose even more momentum.

Although India is still considered the fastest growing major economy, growth forecasts have been lowered compared to the previous survey.

"A more flexible fiscal and monetary policy should help mitigate the effects of the weakening of export demand on growth in emerging Asia. Nevertheless, this year's regional growth is expected to slow further to its lowest rate in a decade, "said Capital Economics' McKeown.