For many years now we have seen stimulatory monetary policy implemented by central banks around the world. Taking a step back from the modest economic recoveries and upswing in the markets, it is also important to assess what has happened to the velocity of money – which refers to the speed with which money changes hand in a given economy.  If velocity is high, monetary stimulus can be much more potent than if it is low.

This is in part predictable, at least in relation to ECRI’s Future Inflation Gauges (FIGs), which lead turning points in velocity. In our latest study, we show that for a number of key economies money velocity is at or near record low levels, and the FIGs outline the clear trajectory going forward. This view has implications for the efficacy of monetary policy in the months ahead.