Global Monetary Policy Exit Strategy

Background:

A slew of signs that the world has passed the worst of its economic slowdown has stirred interest in when and how central banks will roll back monetary easing. Less negatively affected economies with higher inflation are likely to tighten first, as Israel demonstrated with a rate hike in August and Australia demonstrated in October 2009. Countries most severely hit by the financial crisis must be careful not to tighten prematurely, before unemployment stops rising, but must also manage inflation expectations from driving up interest rates. They may consider alternative monetary policy regimes that would prevent financial crises. Central banks must coordinate their tightening strategies as timing is of utmost importance to prevent a disorderly exit from loose monetary policy.