Economic Research May 26,2017 Global Data Watch trillion from end-2017to end-2018 Asian industry to bounce back from early 2Q17 soft patch (210k), strong bounce back in Japan and Korean April IP Threading the needle Over the past eight years varied large-scale asset purchase plans have been implemented, expanding G4 central bank balance sheets to about $14 trillion as of the end of 2016(Figure 1). This remarkable $8 trillion increase, repre- senting 22% of G4 GDP, is not complete as we look for balance sheets to rise a further $2 trillion this year (Table 1). Nonetheless, we stand on the cusp of a major shift in balance sheet policy. This week’s FOMC minutes show the Fed laying the groundwork for shrinkage starting before the end of this year. With the ECB and BoE expansion on track to end in the coming year, the path to- ward a declining G4 balance sheet is now on the horizon. Large-scale asset purchase programs were designed to substitute for policy rate cuts constrained by the lower bound and dysfunctional credit channels. Their effective- ness—related to both portfolio balance and signaling channels—is evidenced by the early cycle relative outperformance of the US and UK, both of whose central banks moved aggressively on this path in 2009. Similarly, the post-2013 recoveries estab- lished themselves in Japan and the Euro area after QE was belatedly embraced. With the pace of QE to tumble to just a trickle next year, there is an understandable anxiety about that ability of rates markets step up to meet this supply. Our macroeconomic outlook assumes that the coming normalization in G4 balance sheets is an endogenous outcome of a healthy late-stage expansion. However, for the adjustments to go smoothly, central banks (with the Fed up first) need to convince markets that the impact of the QE unwind is not sym- metric to the earlier buildup. In doing so, they will try and neutralize the sig- naling channel. In the event, the portfolio balance channel effect of QE will dominate. That is, to the extent that QE dynamics are already discounted in markets, the unwinding of balance sheets will have a limited impact on long rates (our forecast assumes the total $1.5 trillion projected decline in the Fed -0.5 0.0 0.5 1.0 1.5 2.0 2.5 4 6 8 10 12 14 16 0910121315161819 Trillion USD Figure 1: G-4 central bank balance sheet 12m chg, tn USD Source: Fed, ECB, BoJ, BoE, J.P. Morgan. Flow Stock Table 1: G-4 central bank balance sheet 12m chg as of Dec, bn USD 201520162017201820192020 Fed-11-28-3-336-483-378 ECB2988451049102-96-75 BoJ6359589544549123 。。。以上简介无排版格式，详细内容请下载查看