Shafts of sunshine try to pierce thick clouds

If anything, even more monetary easing could be in the pipeline.

A minority of policymakers at the Bank of England wants to expand its bond buying. The nominee to head the Bank of Japan is promising profound change to root out deflation.

Even the conservative European Central Bank (ECB) pondered a further interest rate cut last week after its staff forecast that the eurozone would not only remain in recession in 2013 for the second year in a row but would shrink by more than previously thought.

Extraordinarily loose global policy settings speak volumes about how much spare capacity there still is in the postcrisis world economy — despite Friday's surprisingly strong U.S. job figures.

“My best guess is that the output gaps are sufficiently large in all the major economies that central banks can do additional stimulus if need be,” said Derry Pickford, macro analyst at investment managers Ashburton in London.

Lots of Slack

U.S. retail sales are likely to have risen 0.5 percent in February, according to a Reuters poll of economists.

That's not bad on the surface, but it would be flat in real terms if forecasts of a 0.5-percent increase in consumer prices prove accurate. Both sales figures and prices are likely to have been lifted by higher gasoline prices.

Estimating output gaps is an imprecise science. But even if America's economy turns out to be closer than anticipated to reaching its inflationary speed limit, Pickford said this was a risk for 2014 and not for the second half of this year.

In a recent speech, Federal Reserve Vice Chair Janet Yellen firmly quashed talk of an early withdrawal of stimulus.

Indeed, after the government reported that the U.S. unemployment rate fell to a four-year low of 7.7 percent in February, traders of short-term U.S. interest rate futures were still betting that the U.S. central bank was more likely to raise rates in early 2015 than in late 2014.

What's more, Wall Street economists polled by Reuters after the jobs report said they expected the Fed to keep buying bonds through the end of this year.

Bruce Kasman, an economist with JP Morgan in New York, said he doubted the unemployment rate would fall much below 7.5 percent at any stage in 2013.

Consumers would have to absorb the shock of higher payroll taxes and job cuts triggered by across-the-board federal spending cuts after politicians in Washington failed to agree a long-term budget deal.

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