CBs Sounding Deflation Alarm?
St. Louis Fed President James Bullard’s warning that the Fed may buy more bonds if ‘inflation continues to go down’ on Tuesday is a warning signal for markets rattled by the decline in commodity prices and other growth-sensitive assets. Bullard – who earlier this year noted that the unemployment rate could fall to 7% by year-end, expressed significant unease with the excessive focus on the Fed’s jobs mandate, while price expectations were starting to drift lower in the background. BoE MPC Member Martin Weale also warned on Thursday that the ‘improved’ inflation position made him feel there was ‘more room for manoeuvre’.
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UBS