The euro zone is not deflating, it’s just at risk of a too-prolonged period of low inflation, says European Central Bank President Mario Draghi.
Speculation about when the Bank of England hikes interest rates took a new twist on Wednesday after minutes from the June policy meeting struck a less hawkish tone than the Governor did in a speech late last week.
By Ann Saphir
Federal Reserve policymakers are expected next week to trim their monthly purchases of bonds by another $10 billion, putting them on track to end the massive program by October or December. So – which will it be, October or December? Some Fed officials are pushing for an answer, and soon.
“It’s about time” was the general reaction when on Thursday the Senate Banking Committee scheduled a vote on Barack Obama’s nominees for the Federal Reserve board. Not that Stanley Fischer, Lael Brainard and Jerome Powell (a sitting governor who needs re-confirmation) have been waiting all that long; it was January that the U.S. president nominated them as central bank governors, and only a month ago that the trio testified to the committee. The urgency and even anxiety had more to do with the fact that only four members currently sit on the Fed’s seven-member board and one of those, Jeremy Stein, is retiring in a month. The 100-year old Fed has never had only three governors, and the thought of the policy and administrative headaches that would bring was starting to stress people out. After all, the Fed under freshly-minted chair Janet Yellen is in the midst of its most difficult policy reversal ever.
To most people, the idea of falling prices sounds like a good thing. But it poses serious economic and financial risks – just ask the Japanese, who only now finally have the upper hand in a 20-year battle to drag their economy out of deflation.
Euro zone inflation has dipped again and some forecasters are hedging their bets on the policy response by saying the European Central Bank could either cut rates this week or sometime in the next two months.
Britain’s economy may have seen one of the fastest rebounds among industrialized nations last year, but half of 56 economists polled by Reuters think the Bank of England has lost some credibility over its handling of the forward guidance policy.