Central banks are still worried about the danger of deflation, even though they have timidly started to lift interest rates. How else would they explain real negative rates almost everywhere in the developed economies?
What a spectacular lesson the first half of the year delivered for investors. At the beginning of the year, it looked like the UK’s vote to leave the European Union was a great idea: the eurozone seemed on the brink of disintegration.
Central banks’ credibility has been eroding bit by bit for a while now, but the first evidence that the public’s expectations about inflation are disconnecting from those of the policymakers emerged on Thursday.
Many in the markets are looking with apprehension at this coming Wednesday’s decision by the Federal Open Market Committee (FOMC), wondering when will the Fed finally pull the trigger on raising the interest rates – or rather, “normalising” an abnormal situation that has lasted since the financial crisis hit in 2007.
As the Federal Reserve’s Federal Open Market Committee (FOMC) starts talks on what is probably the most watched interest rate hike in history, the importance of getting it right cannot be over-emphasized.
Ever since the Conservatives came to power in 2010, austerity has dominated the UK budget. It was a policy introduced to reduce the yawning budget deficit, which made the country vulnerable to attacks from the bond vigilantes.
Hardly a day goes by without a piece of good news and/or upbeat forecasts about the eurozone. Two of the most recent ones deal with positive eurozone earnings revisions and the improved macroeconomic picture.