Negative policy rates have come under attack in recent months, but most of the criticisms look overdone. We still think Japan will cut its policy rate further in June or July, while also stepping up its asset purchases. But those European central banks which have already cut rates further below zero will probably rely more on QE and exchange rate intervention to boost their economies. More generally, we expect ten of the twenty central banks covered in this publication to ease policy further this year. The Fed, however, is likely to raise rates at least twice over that period, beginning in June. And the People’s Bank of China will probably leave policy broadly unchanged, as growth appears to be picking up.
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