Global monetary policy in action

Left: Bloomberg and Wells Fargo Investment Institute. Quarterly data from January 1, 2007 to September 30, 2022. Fed = Federal Reserve. BOJ = Bank of Japan. ECB = European Central Bank. GDP = gross domestic product.

Right: Bloomberg and Wells Fargo Investment Institute. Monthly data from January 1, 2000 to September 30, 2022. Headline central bank policy rates of selected countries. Refi = refinance. Min = minimum. RMB = Chinese Yuan Renminbi.

Key Takeaways

  • Ample liquidity will be responding to central banks’ aggressive monetary tightening to counter inflation pressures at a 40-year high. Still-moderate financial stress is set to move higher with global central-bank tightening, posing among the biggest threats to the global economy if the change comes too abruptly.
  • Central-bank stimulus has outpaced that of the Global Financial Crisis in 2007 – 2009, signaling an extended period of adjustment to bring central-bank balance sheets back in line with their historical norms.