 |
| Janet Yellen, Federal Reserve |
How and when the world’s central banks extricate themselves from the extraordinary monetary easing that has taken place over the last decade has become the debate of the summer.
The backdrop to this is the presumption that the Fed will hike rates again in September and that Mario Draghi at the ECB is turning his attention to how and when he might do the same.
The complacency of this position was, however, thrown into doubt in mid-July after inflation missed its fourth consecutive target in the US. The consumer price index rose an annualized 1.6% in June – down from 1.9% in May and lower than the 1.7% that had been forecast. Inflation in the US is now down from a five-year high of 2.7% five months ago: the debate has moved rapidly from what the pace of tightening by the Fed might be to whether or not it will tighten at all.
“I do believe part of the weakness in inflation reflects transitory factors,” declared Janet Yellen when the June inflation figures were revealed on July 12 – seeming to indicate that she will press on with rate hikes as expected.
