Haunted by memories of past U.S. interest rate hikes, the world's central banks are laying the groundwork for a transition to life with less global stimulus, with many countries already signalling moves to the exit.
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FRANKFURT (Reuters) -The European Central Bank is all but certain to maintain a generous flow of stimulus when policymakers meet on Thursday, fearing that higher borrowing costs could smother a still nascent recovery.
FILE PHOTO: The European Central Bank (ECB) logo in Frankfurt, Germany, January 23, 2020. REUTERS/Ralph Orlowski
Just emerging from a pandemic-induced double-dip recession, the 19-country euro zone economy has relied on unprecedented ECB stimulus to stay afloat. And even as growth surges with the easing of COVID-19 restrictions, policymakers appear keen to err on the side of caution.
Recent comments from ECB President Christine Lagarde and board member Fabio Panetta suggest the June discussion effectively ended even before Thursday’s meeting, with a cut in bond purchases unlikely, even if policymakers acknowledge an improvement in growth prospects and the rapid pace of vaccinations.
Japanese Prime Minister Yoshihide Suga is likely to compile another big economic stimulus package before calling a snap election in September, the Nikkei newspaper said on Thursday, although most major economies have scaled back crisis-mode policies to combat the coronavirus.
Asian shares edged higher but held their recent trading range on Thursday as investors focussed on U.S. inflation data and the risk of an upside surprise that could prompt the Federal Reserve to start tapering its massive stimulus.
The yield on 10-year Japanese government bonds fell on Thursday to its lowest in nearly five months, following a retreat in U.S. Treasury yields, while strong response to a domestic liquidity auction lifted investor sentiment.