'Patient' monetary policy. 'Muted' inflation. 'Uncertai...
WASHINGTON/FRANKFURT - “Patient” monetary policy. “Muted” inflation. “Uncertainty” over global trade and government policies that may be undermining the economy.
Those five words sum up why the ECB pushed back consideration of any rate increase to next year and expanded lending to banks to stave off a credit crunch.Following on the heels of the Fed’s pause of its tightening cycle, the launch of stimulus in China this week, and a debate over more action by the Bank of Japan, the ECB’s latest policy decision completes a dramatic turn from just a year ago when the world seemed in the midst of a synchronized expansion.
“The slowdown of foreign growth now appears to be more persistent than initially assumed,” Fed Governor Lael Brainard said in remarks on Thursday that continued the U.S. central bank’s shift to what she called “softer” policy. The challenges to European growth are “mostly of external source,” including Brexit and U.S. trade policy, he said. “The uncertainty is over how long these will continue affecting the world economy, the euro economy, and confidence more generally.”
But the more chronic impact may be the corrosion of confidence in a global recovery that was running full tilt in 2017 and much of 2018. Throughout that time, U.S. central bankers spoke optimistically of “tailwinds” they felt would let them continue raising rates.
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