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What will be the effect of central bank balance sheet growth stopping? - Citi

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What will be the effect of central bank balance sheet growth stopping? - Citi

Wed, 13 September 2017
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(ShareCast News) - Advance economy central bank balance sheet growth is headed towards zero but the direct impact on the real economy is likely to be "moderate" unless it leads to a sharp spill lower in asset prices, analysts at Citi said.
Should the latter scenario materialise, then the impact on the real economy could be severe.

By Citi's count, net asset purchases were running at $100bn per month at present, down from $180bn in mid-2016 and were headed towards zero by the close of 2018.

Nonetheless, that was in fact a reflection of improved economic growth around the world, they said, and also political considerations as well as technical constraints.

In any case, what might stop or delay tapering?

The three options tabled by Citi were, a return of low inflation, major changes in central bank (mostly the US Federal Reserve) leadership or an economic slowdown (unlikely in the near-term).

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