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The Era of Cheap Money from Central Banks is Over


According to two major investment banks – Citigroup and JPMorgan, the days of cheap money and low interest rates are nearly gone after almost 10 years since the last global crisis. They warn us that major central banks around the globe (including the ECB, for example) are going to start toughening their monetary policies in 2018 at the fastest pace in 12 years.
 
The thing is, the global economy has been growing faster than ever since 2011. This is expected to make the central banks raise the key interest rates by at least 1%, which is something we haven’t seen since 2006. That said, in 2018 we are going to see true monetary toughening, Citigroup experts are convinced.
 
Citigroup expects the Federal Reserve to raise the rates at least 3 times throughout 2018. All in all, they expect the Fed’s rates to be increased by at least 2 percent points, which is something we haven’t seen since 2008. At the same time, the central banks of Great Britain, Australia, New Zealand, Sweden , and Norway are expected to rise their rates by at least 1 percent point. All in all, the central banks from developed economics are expected to raise the rates by 0.4-1 percent point on average.

JPMorgan goes beyond those predictions. They expect the Fed's rates to be raised at least 4 times in 2018 – 1,2 percent points in total. The last time the rates grew that fast in 2006 before the global crisis.

At the same time, the name a few price bubbles that are going to hit the global financial market in 2018. One of them is Bitcoin, the world’s first and most expensive cryptocurrency that has already grown by 1800% this year.

Other experts say that it's the U.S. stock market that’s going to be the reason for the expected interest rate hikes in 2018. The thing is, the market cap has increased by 1600% over the last 9 years. Also, there is a group of experts who put the blame on the credit boom in China while the Chinese public debt is 3 times as high as the Chinese GDP.
 

 

Since the 2008-2009 financial crisis, all the central banks altogether have cut their interest rates more than 700 times and has pumped into the global economy over 16 trillion dollars.

 

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