Janet Yellen, the chair of the U.S. Federal Reserve, is betting that a period of inflation will soon dominate economic policy. After years of soft increases in the consumer price index, Yellen said she believes inflation will begin to accelerate.
The Bank of England Governor Mark Carney and the president of the European Central Bank, Mario Draghi, agreed with Yellen. All three echoed their thoughts at the International Monetary Fund’s yearly meeting.
Many economic advisors and policymakers cheered the improving health of worldwide economies since the financial collapse of 2008. However, the consensus among policymakers is to keep a close eye on fast-rising asset prices and inflation weakness.
Most of the economic leaders said they will push forward with tightening monetary policy. Yellen said she believes the “soft increases” in the CPI will not continue, so the Fed will “move forward” with gradual increases in the benchmark interest rate. Most analysts speculate that the Fed will increase rates again when it meets in December. In an effort to reduce its balance sheet, the Fed began selling off some of the mortgage-backed securities it has held since the Great Recession.
The ECB and Bank of England may soon follow the U.S.’s attempts to scale back stimulus policies they implemented during the financial crisis. According to reports, when officials from the ECB meet again in late October, they are expected to present an outline of a bond-buyback plan. As economies continue to improve, analysts believe the ECB will cut its bond-buying activities in half. According to Bloomberg, the ECB buys nearly $71 billion (60 billion Euros) in assets each month.
The Bank of England governor stated recently that he may need to start raising rates from their current record lows because “England’s economy is running out of capacity”. However, unlike its peers, Great Britain is already dealing with high inflation since the country voted to leave the European Union.