As global economic growth picks up, Morgan Stanley highlights that central banks around the world don’t exactly seem in any rush to tighten monetary policy. Sure many nations are tightening, but overall, given that interest rates came down so low, it’ll take more than a few hikes just to get interest rates back to anything near normal levels.
Thus keep riding the liquidity. Monetary policy, even after some tightening, will remain very loose by historical standards for quite some time. Or, in the commercial terms of a pro analyst, it will remain ‘ample, abundant, and augmenting’:
Joachim Fels @ Morgan Stanley: While we now expect China to start hiking official interest rates already in 2Q, and thus one quarter earlier than previously thought, the big picture hasn’t changed, in our view: central banks around the world are more likely to crawl rather than rush towards the exit. Any tightening is likely to be gradual and cautious, and short rates are likely to stay well below neutral levels in the foreseeable future. Hence, we expect liquidity in the hands of consumers, investors and companies to remain ample, abundant and augmenting.
Thus, in our view, central banks will keep a steady tailwind behind most asset markets, as will the near-term economic growth that loose policy stimulates.
(Via Morgan Stanley, Global Economics, Joachim Fels, 4 February 2010)