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November 2013 Capital Markets Monitor and Teleconference
Further Monetary Easing and Growth in Corporate Debt
Notwithstanding continuing speculation about when Fed tapering will begin—and lingering concerns about another U.S. budget and debt ceiling impasse—unconventional monetary policies in mature market countries are expected to be eased a notch further with possible moves by the ECB and the Bank of Japan.
Potentially divergent policy moves among G3 central banks have thus contributed to uncertainty, and some increase in FX market volatility. Moreover, after six years of abundant liquidity and near-zero policy rates, additional easing of monetary conditions could increasingly lead to financial distortions and pockets of bubbles in asset markets. In particular, corporate indebtedness has increased across the world.
As a consequence, the nexus between the balance sheets of banks and highly-indebted segments of the corporate sector will be an area of market attention during the eventual normalization of monetary conditions in the mature economies—in addition to interlinkages between banks and sovereigns, especially in the Euro Area and Japan.
Following the publication of the Capital Markets Monitor Hung Tran hosted a teleconference on November 5, 2013. The recording of the briefing and the Q & A session is now available for replay.