We're at an inflexion point around monetary easing. We seem to have hit the peak. China has been winding back for some months, while NZ has introduced some controls on housing. India has tightened cash reserve requirements and in Australia there have also been some shifts in policy.
A few things will need to happen to cement the shift from recovery to expansion. Vaccine rollouts need to continue – and be effective. Recent reports around success in preventing transmission is very good news.
So what does this all mean? The increase in bond yields, which should continue, is increasingly likely to occur because of increases in the real component rather than the inflation component.
The inflation component in the US bond market is now meaningfully above two per cent, which is consistent with US Federal Reserve policy. That looks quite mature.
We're likely to see the US dollar be less weak. A cyclical recovery typically is good for high-beta currencies, but the increase in US bond yields, I think changes the dynamic there.
Fiscal policy in many countries should increasingly shift from a pandemic response to a longer-term view.
In the business sector, the light at the end of the tunnel is clearly becoming bigger. The shift to expansion is likely to mean business will focus on investment as capacity constraints start to emerge.
As a final point, the COVID-19 crisis in large part should be transitory. This was not a shock driven by unsustainability in the economy, as we would normally understand it.
That means as vaccines roll out and economies return to normal, the sort of policy settings we've seen during COVID-19 are not going to be appropriate - they're going to be too stimulatory. We're already seeing signs of that in a number of countries.
Richard Yetsenga is Chief Economist at ANZ