Moody’s: Major central banks to slow pace of tightening

SINGAPORE • A more downbeat view of the global economy merits lower expectations for tightening by the world’s major central banks, according to Moody’s Investors Service Inc.

The US Federal Reserve (Fed) probably will hike interest rates two times this year, at most, instead of the previously projected three or four, analysts at the credit-rating company, including VP Madhavi Bokil, said in a research note dated last Friday. The European Central Bank (ECB) will delay increasing deposit facility and refinancing rates until 2020, they said, revising a forecast for the second half of 2019.

“With the pace of economic expansion slowing across major economies and the balance of risks tilting to the downside, the Group of Three central banks — the Fed, the ECB and the Bank of Japan (BoJ) — are all signalling a wait-and-see approach,” the Moody’s analysts wrote.

The company’s views were altered in part because of the Fed’s recent greater emphasis on the need to be “patient” and “cautious”, Moody’s said. Uncertainties include the US-China trade talks, the Chinese economic slowdown and shifting market sentiment. The prolonged US government shutdown, which has at least temporarily ended, has left holes in the economic data.

In Europe, the analysts point to souring growth data, especially worse than expected figures from Germany and France and signs of already-weak expansion in Italy. Core inflation remains “well below” the ECB’s target range, they note.

Finally, the BoJ’s inflation outlook has become even more dire, meaning no monetary policy tightening should be expected this year or in 2020, Moody’s said. — Bloomberg