Where are we on the monetary easing cycle?

Societe Generale with the note

Monetary policy has been in an easing phase since the Fed’s first rate cut in July 2019, with the policy – rate staying at the zero bound since March 2020. Financial conditions have eased globally, touching historic lows, with pandemic – induced peak quantitative easing (QE) and other emergency stimulus injecting significant liquidity into the system.

With the rollout of mass vaccinations against COVID-19 and a seemingly robust recovery of the economy, markets are anticipating a reversal in monetary policy from one of accommodation to tightening, partly as a countermeasure to the growing concern about rising inflation. Yet central banks are still pursuing a lower-rates-for-longer policy, with the Fed indicating that it will maintain the low policy rate until 2023. With the significant build-up of central bank balance sheets, any explicit tightening through policy rate hikes is likely to
be gradual, as QE tape ring and balance sheet contraction may first lead the way.

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