(Bloomberg) — 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.
The Federal Reserve 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 vice president Madhavi Bokil, said in a research note dated Friday. The European Central Bank 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 G-3 central banks — the U.S. Federal Reserve, the European Central Bank and the Bank of Japan — are all signaling 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 U.S.-China trade talks, the Chinese economic slowdown, and shifting market sentiment. The prolonged U.S. 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 Bank of Japan’s inflation outlook has become even more dire, meaning no monetary policy tightening should be expected this year or in 2020, Moody’s said.