By Andy Bruce
LONDON (Reuters) - Financial markets have become convinced in the past two weeks that two years of one-way traffic from the developed world's central banks on policy is coming to an end.
The difficulty, on the evidence of the last few days, is the mass of conflicting signals on how shaky things still are, or how much better they will get - and as a result getting from here to actual changes in policy will probably take months.
Since the euro zone's sovereign debt crisis administered another jolt to the global economy three years ago, central bank decisions on more monetary easing have not so much been a question of if, but when. The same has largely gone for a fragile U.S. recovery.
That's not the case in 2013, even if global growth looks likely to disappoint again this year.
Faced with fewer immediate threats but still under pressure to nurse the world economy back to more convincing health, central bankers have been grasping at a disparate and volatile set of economic indicators for a steer on policy.
"That's a fairly difficult challenge at the best of times, and we're hardly in the best of times," said Craig Wright, chief economist at Royal Bank of Canada in Toronto.
Data from the United States last week summed up the problem.
Depending on the indicator, there was a case for the Federal Reserve maintaining support for the economy by pressing on with its $85 billion-a-month bond purchase program for a long time, or scaling it back soon.
U.S. manufacturing activity unexpectedly fell to the lowest level in four years in one sign, said economists, that the Fed would refrain from winding down its program anytime soon.
On the other hand, Friday's news that U.S. employers stepped up hiring was interpreted as a sign of economic resilience, suggesting the Fed could begin to scale back its stimulus later this year.
The Fed's officials are split too, meaning it could be months until a consensus emerges, but most economists expect a scaling back of bond purchases by the end of the year and a sizeable number expect reduced buying as early as September.
Of course, central bankers have to take into account developments in economies other than their own, and the economic data from the rest of the world has been similarly volatile.
"The indicators are mixed across the globe, some countries look a little more convincing than others. I'd put the U.S. and Canada as looking like a recovery is taking hold, while the UK and euro zone is still hit-and-miss," said Wright.
While a fairly quiet week for economic data lies ahead, central bankers and top officials from the World Bank, OECD and Asian Development Bank will give their views on the world economy on Monday at the 2013 Conference of Montreal.
MORE TO DO?
For Europe and Japan, the question is whether yet more needs to be done.
Early doubts about the effectiveness of a growth strategy outlined by Japanese Prime Minister Shinzo Abe, dubbed Abenomics, pushed Japanese stocks <.n225> to two-month lows on Friday after their worst week in two years.</.n225>
This week will provide a better idea of whether that was a blip in the aftermath of the Bank of Japan's announcement of $1.4 trillion in monetary stimulus, or a sign investors reckon even that might not be enough to right the world's No.3 economy.
"Recent weakness in the market represents a little bit of a disappointment for Abenomics," said Kenji Shiomura, an analyst at Daiwa Securities.
"But it would be too extreme to say that hopes for Abenomics have faded completely because the biggest impact Abenomics gave the market was monetary easing, and it is still continuing."
Perhaps the biggest worry for Japanese officials is the yen's spike to its strongest in two months against the dollar.
The government showed little concern about Friday's surge, but the calm response masks a lack of solid policy options should the yen strengthen further and stamp on the country's ability to export.
European policymakers, like their American counterparts, have had a hotchpotch of numbers to deal with.
Economic confidence figures have surprised on the upside in the euro zone over the last month, but harder data like business surveys still point to a dearth of demand.
And like the Fed, the lack of a clear guide for the economy means the European Central Bank is sitting on the fence when it comes to the question of stimulus.
"There was a common assessment that the changes that have taken place are not sufficiently one-directional as to grant action now," said ECB President Mario Draghi after leaving policy unchanged last Thursday.
Unusually, Britain has been leading the way in Europe of late, according to the latest business surveys. But like the United States, there is little certainty about whether the UK will keep up the momentum.
"I think when you look at turning points in the cycle, which is hopefully where we are in Europe, you do get these mixed signals. And that's what we're seeing," said Wright from RBC.
(Editing by Patrick Graham)