Financial markets will keenly watch how the US Federal Reserve strikes the right policy balance between inflation and interest rates in the coming months
Even as the global economy is witnessing a synchronized recovery, inflation in most parts of the developed world continues to undershoot the target. In the US, for instance, prices continue to remain soft despite the level of unemployment drifting to a near 17-year low.
Earlier this week, Federal Reserve chair Janet Yellen said that it can be dangerous if inflation drifts down and over time the central bank is not able to achieve the inflation target. One reason why it could be so is that it could start affecting expectations and make things more difficult for the central bank. The Fed is widely expected to raise policy rates in its December meeting.
Clearly, the Fed would not want to be in a situation where it raises rates at a faster pace and puts further pressure on prices. However, it will also want to avoid raising rates too slowly, which might result in inflation overshooting the target.
Financial markets will keenly watch how the most important central bank strikes the right policy balance in the coming months.
- Opinion | Atal Bihari Vajpayee exuded unusual warmth, comfort
- Opinion | Turkey flashes warning sign to Asia
- Opinion | What the shrinking trend of urban households tells about us Indians
- Opinion | The growth outlook and the investment potential of states
- Opinion | We still don’t know whether Uber is a real business
Editor's Picks »
- GAAR and GST reporting in tax audit deferred till 31 March
- BPCL Mumbai unit to remain shut for at least 2 months after fire
- Supertech to invest ₹800 crore this fiscal on various projects to deliver 10,000 flats
- Gold set for biggest weekly fall in more than a year
- Trump asks SEC to study half yearly corporate filings, instead of three