MUNICH – With the continuous synchronized upturn in global growth, central banks of systemic importance will probably be more willing and able to begin in 2018 and, in one case, continue, the normalization of monetary policy. But what is true for the central banking community as a whole is more nuanced when evaluated at the level of individual institutions. Here is the perspective in ascending degrees of policy difficulty and, therefore, of the risks of policy errors.
The Federal Reserve of EE. UU It is the most advanced in the policy normalization process. It has halted its unconventional program of securities purchases, raised rates four times and established a plan for the gradual reduction of its balance.
The Fed will probably enter in 2018 with another rise and a larger window to normalize due to the fiscal measures that make their way through Congress. As such, the markets may need to revise upward their implicit pricing of the Fed's actions to be more consistent with the projection of two or three additional rate increases next year. And, in the context of the "beautiful normalization" underway, such revisions will not necessarily have to be detrimental to financial stability or economic growth.
One complexity facing the Fed is that, when it comes to long-term yields, bond maturity dates and the shape of the yield curve, the unconventional policies applied by its peers in other parts of the advanced world they continue to be an important influence. There, the degree of policy difficulties is noticeably higher.
The Bank of Japan will face increasing pressure to lift its foot off the stimulus accelerator. In addition to having to think more seriously about the moderation of its asset purchase program, the bank will likely take action next year to revise its yield target on 10-year upward rates (currently zero percent); and you should sequence this carefully with a reduction in unconventional purchases. The ease with which this is implemented will depend in large part on whether Prime Minister Shinzo Abe's stronger internal political situation allows for the implementation of long-delayed structural reforms (which, in the Japanese context, has been termed "the third arrow") .
The European Central Bank will do everything possible to fulfill its recently announced plan to cut monthly purchases by up to 30 billion euros by September, a prelude to ending the large-scale purchasing program before eliminating Interest rates. Negative territory But, judging by the minutes recently published by the ECB, it is said that the members of the Governing Board have different opinions, and the bank could find itself in the difficult position of having to change its anticipated orientation accelerating the progressive elimination of QE, especially if inflation rebounds faster than currently expected.
As difficult as it is, especially for a central bank that sets policies for 19 different member countries, the complexities may well be less than those faced by the monetary position of the United Kingdom.  With the growth outlook revised downwards and with the inflation rate well above the target, the Bank of England is in an unwanted political dilemma, particularly after being forced to raise this year for the first time in about 10 years. Responding to the overshoot of persistent inflation through a walk again runs the risk of deepening the economic slowdown. Delaying the rise and inflationary expectations could worsen. And all this before you consider the Brexit uncertainty.
Putting all this together, there is good news for the global economy: the world's most powerful central bank, the Fed, faces the least relative degree of policy difficulty (and in the process, would be able to re-establish greater political flexibility to counteract the risk of possible growth and inflation deficits in the future). Another relatively bright point is that the greatest complexity faces the least systemic within the group: the Bank of England. But this does not automatically translate into a clear path when it comes to the risk that, in scenario analysis, it becomes a central bank policy error in 2018.
Instead of reflecting the perspectives of individual institutions , the largest The uncertainty of the monetary policy facing the global economy is what would happen if all these central banks, together with the People's Bank of China, decided to reduce their monetary stimulus at the same time. When it comes to central banks, this is the main source of risk for the prices of assets and the global economy, and would require monitoring of high frequency policies and close international consultations.
Mohamed A. El-Erian is an opinion of Bloomberg columnist. He is the chief economic adviser to Allianz SE. He previously served as deputy director of the International Monetary Fund.