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Since 2015, global central banks have been reversing their ultra-easy monetary policy stance with the U.S. Federal Reserve leading the way. In this piece, we rank the majority of the G10 central banks from hawkish to dovish, based on their policy outlook,
- Federal Reserve: The number one rank belongs definitely to the U.S. Federal Reserve which has hiked rates seven times since 2015 and has started reducing its balance sheet since October last year. From this October, the pace of reduction is set to hit $600 billion per annum. After hiking twice this year already, the Fed has forecasted two more this year and the market pricing suggest that investors are pretty convinced that the central bank would follow through its promise.
- Bank of England: The second positions go to BoE, which hiked rates by 25 basis points earlier this week, which has pushed the rates to the highest level since the 2008/09 financial crisis.
- Bank of Canada: The central bank of Canada is the third most hawkish central bank at the moment as inflation has reached its stipulated target range and the central bank of Canada has responded with four rate hikes since 2017. The strength is the U.S. economy is largely benefiting Canada and pushing the rates higher.
- Reserve Bank of Australia: RBA has so far refrained from hiking rates like the above three central banks and it is yet to provide meaningful forward guidance with regard to rates. However, its neutral monetary policy stance keeps it in the fourth place.
- European Central Bank: ECB is on the fifth position and ahead of RBNZ, simply because, despite its ultra-easy monetary policies, it has signaled a clear end to its asset purchase program by end of this year and signaled the possibility of a rate hike in 2019.
- Reserve Bank of New Zealand: Since RBNZ has clearly signaled that it would maintain the current policy stance for a prolonged period of time and persistence weakness in the economy and as well as in key commodities puts it behind the ECB.
- Bank of Japan: The last position in our rankings goes to the BoJ, which has maintained its stance that the ultra-easy monetary policies would continue until the 2 percent inflation threshold get reached.
