The world economy has entered 2014 with a lot more momentum than it had a year ago. Business and consumer confidence have improved and unemployment is falling rapidly in several countries. However, while this should eventually prompt central bankers to raise interest rates, we do not expect significant hikes this year. Instead, the Fed and Bank of England are likely to leave rates unchanged even after unemployment falls below their current thresholds, while both the ECB and the Bank of Japan look set to announce additional policy stimulus.
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