The world's major central banks will start heading down different paths in the coming months, Standard & Poor's top economist Paul Sheard says.
Paul Sheard said the United States and British economies were recovering, while Europe's was turning down and Japan's remained sluggish.
Paul Sheard. Photo: AFP
But he said even in the US, Federal Reserve chair Janet Yellen had indicated there was no hurry to raise interest rates.
Mr Sheard said two of the major central banks, the Federal Reserve and the Bank of England, were starting to be in a position where they could start to raise interest rates, although probably at a very slow pace.
But he said that was not so for the other two major central banks, and the Bank of Japan was continuing with quantitative easing at a very rapid rate, while the European Central Bank (ECB) was embracing a more aggressive balance sheet expansion.
Earlier in the year, the central bank of central banks' - the Bank of International Settlements - warned booming financial markets amid record low interest rates may contain the seeds for another financial calamity.
Paul Sheard said getting economies back on their feet must be the priority, though the need to reduce red tape, remove burdensome tax and loosen labour laws must also be addressed.
Last year's so-called "taper-tantrum" - when the Fed signalled a possible end to low interest rates - hit emerging countries hard, particularly those with large budget and current account deficits.
Mr Sheard said in hindsight, that may have been a good thing to help markets prepare for change, with the Fed expected to start lifting interest rates by the middle of next year.