is a central banker’s main job? Ask the man on the street and the chances are he will say something like “keeping a lid on inflation”. In popular perception, and in their own minds, central bankers are the technicians who squeezed high inflation out of the rich world’s economies in the 1980s; whose credibility is based on keeping it down; and who must therefore always be on guard lest prices start to soar. Yet this view is dangerously outdated. The biggest problem facing the rich world’s central banks today is that inflation is too low.
The average inflation rate in the mostly rich-world OECD is 1.5%, down from 2.2% in 2012 and well below central banks’ official targets (typically 2% or just under). The drop is most perilous in the euro area: annual consumer-price inflation was only 0.7% in October, down from 2.5% a year ago.
That is partly because commodity prices have been falling, but even if you strip out volatile food and fuel prices, the euro zone’s underlying or “core” inflation is 0.8%, as low as it has ever been since the single currency began. I
n America the headline rate in September was 1.2%, down from 2% in July—and the core rate, as defined by the Federal Reserve, has stubbornly stayed at 1.2%, close to its low point. There were inklings this week that some at the Fed want even looser monetary policy. True, things are improving in Japan, which seems finally to have escaped 15 years of falling prices, but even there underlying inflation is still only zero. The only big, rich economy where prices are rising at a clip is Britain, where overall inflation is 2.7%.
Read more: The global economy: The perils of falling inflation | The Economist
The average inflation rate in the mostly rich-world OECD is 1.5%, down from 2.2% in 2012 and well below central banks’ official targets (typically 2% or just under). The drop is most perilous in the euro area: annual consumer-price inflation was only 0.7% in October, down from 2.5% a year ago.
That is partly because commodity prices have been falling, but even if you strip out volatile food and fuel prices, the euro zone’s underlying or “core” inflation is 0.8%, as low as it has ever been since the single currency began. I
n America the headline rate in September was 1.2%, down from 2% in July—and the core rate, as defined by the Federal Reserve, has stubbornly stayed at 1.2%, close to its low point. There were inklings this week that some at the Fed want even looser monetary policy. True, things are improving in Japan, which seems finally to have escaped 15 years of falling prices, but even there underlying inflation is still only zero. The only big, rich economy where prices are rising at a clip is Britain, where overall inflation is 2.7%.
Read more: The global economy: The perils of falling inflation | The Economist
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