Today, we present two charts which show the state of the global economic conditions.
First, let’s look at the structural fiscal deficit (as a proportion of GDP) for the entire global economy.
The above chart shows that the global fiscal policy conditions are at the easiest in at least past 20 years.
We believe that, this trend reversal, coupled with subdued international commodity prices, will significantly reduce pressure on RBI to continue to raise rates.
Now, let us look at the global real policy rates
The above chart is computed based on difference in central bank policy rate and reported 12-month CPI for each country. The chart shows that the real policy rates for the globe as a whole have turned negative since the last few quarters, and the global monetary policy is at the easiest in at least last 10-years.
Can we say that, from historical perspective, the financial markets today have received the best possible combination of policy steroids?