Volatility: back to normal

Michala Marcussen, Group Chief Economist, explains the latest economic trends.

The paradox of uncertainty

A certain level of uncertainty is part of life, and insurance (both private and public) and precautionary savings help manage this so that we can go about our lives unabated. At times, however, uncertainty increases well beyond these levels, often driven by political events. Faced with such uncertainty shocks, business managers will often freeze new investment and hiring decisions, while consumers delay spending on big ticket items such as cars or the purchase of a new home.

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Bitcoins, cash and tulips

Bitcoins generated much excitement in 2017, starting off the year valued at just over $1 000 per bitcoin and closing the year at around $10 000, having peaked at close to $19 000 in mid-December 2017. While the extreme volatility of Bitcoin generates both spectacular gains and devastating losses, it significantly reduces the ability of the crypto-currency to serve as a means of payment; the purpose for which it was originally designed. Michala Marcussen, Group Chief Economist, explains the latest trends around the bitcoin.

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Monetary Policy

Monetary Policy: back to normal?

The 2008 financial crisis witnessed unprecedented policy responses from the world’s major central banks. Main central banks cut their policy rate to near 0%, exhausting the conventional monetary options. Then, to further ease financial conditions, they started to design a variety of unorthodox monetary policy tools commonly labelled as “unconventional monetary policies”. These have included “lower-for-longer” forward guidance on the short-term rate, large-scale asset purchases, large-scale liquidity provis.

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Sustained growth, but past the sweet spot

The world economy is on track to reach 3.8% growth in 2018, marginally up from the 3.7% recorded in 2017, on the back of a fiscal impulse in the United States, and faster demand growth in commodity-exporting countries. While shifting toward a domestic consumption-driven economy, China’s economic growth is slowing down but remains a key driver of the global expansion.

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