Janet Yellen is expected to get the final political nod in the next couple of weeks to chair the U.S. Federal Reserve. So when she signaled in congressional testimony last week that the U.S. economy was still in need of easy money, it was more than a throwaway line to please vetting senators worried about their voters' lack of jobs. Yellen was using her clout to highlight the two main characteristics of the world economy: Recovery in America and elsewhere is not yet durable. And there is no fear that inflation will demand an end to the ultra-low interest rates and money-printing being used to sustain what growth there is.
This week's economic data drop touches on both sides of this equation - U.S. consumer inflation for October is reported on Wednesday and preliminary purchasing managers' indexes (PMI) for both the euro zone and the United States are out a day later, along with Philadelphia Fed's November business index. Inflation's amazing disappearing act is rising to the top of the agenda in many economies. Fears of Japan-style deflation are premature but recent slides have at the very least raised policymakers' interest.
A plunge in euro zone inflation to just 0.7 percent in October prompted the European Central Bank to deliver a surprise interest rate cut, though not with unanimous support from its members. The bank targets at or slightly below 2 percent as the level it considers inflation healthy, and the economy is still moribund. Other non-euro countries in the region are reporting much the same on inflation. Poland's is running at 0.8 percent, Sweden had a month of falling prices, and even Britain's relatively high cost-of-living unexpectedly dropped to 2.2 percent year-on-year in October.
Although the U.S. consumer price index figures to be released this week are not the ones the Fed targets, they may point to inflation shrinkage as well. The early consensus is for October CPI to show no increase month-on-month from September, when the annual rise was 1.2 percent. Some analysts even predict a fall in prices for the month.
Source: Corliss Online Group