Silicon Valley has become a synonym for innovation and, with its ecosystem of super-moneyed venture capitalists, it is world renowned as a hub for new products and software. Europe meanwhile has struggled to produce the likes of Facebook, Amazon or PayPal, or to garner the levels of investment for its startups. But could that be about to change?
The Federal Reserve expects inflation to rise gradually to 2%, leaving time for the central bank to wait before raising interest rates.
The Federal Reserve said Wednesday afternoon in a statement that low energy costs were keeping inflation muted, which was also causing the Federal Reserve to be patient before raising interest rates lest it cause disinflation to lead to outright deflation. “Inflation has declined further below the Committee’s longer-run objective, largely reflecting declines in energy prices,” the Fed said.
Home prices and home sales continue to rise, while consumer confidence unexpectedly surged to its highest point since 2007.
Consumer confidence surged to 102.9 in January, up over 10% from its December levels. According to the Conference Board, the consumer confidence index rose on improved conditions for businesses and workers, creating an expectation of higher earnings and greater spending in the near term.
When we think about income and wealth inequalities we are tempted to lay blame on the old way of doing things. In Capital in the Twenty-First Century, Thomas Piketty picks out inherited money as a driver of unsustainable disparities between the global rich and poor. Oxfam recently pinpointed the high-profit finance and pharmaceutical industries as engines of inequality that distribute wealth to the wealthy.
In a documentary that aired recently on the Canadian Broadcasting Corporation’s popular The Fifth Estate program, an allegory of Vladimir Putin was presented. The wily Russian president was described growing up in a shabby St. Petersburg apartment, where he would often corner rats.
Now, punished by low oil prices and Western sanctions against Russian incursions in Ukraine/ Crimea, Putin is himself the cornered rat. Many wonder, and fear, what he will do if conditions in Russia become increasingly desperate.
On 22nd January 2015, European Central Bank announced its plan to revive Eurozone’s stagnant economy agreeing to pump in €60 billion ($69 billion) per month thus grabbing headlines. Quantitative Easing (QE) is not an unfamiliar policy in the financial world. When short-term interest rates are closest to zero and the central bank can no longer ease policy by simply adjusting the price of its reserves, then it aims to adjust the quantity of reserves.
The Federal Reserve’s two-day meeting concludes Wednesday. To the extent the FOMC meeting is ever routine, this should be it. Its forward guidance evolved at the end of last year. The “considerable time” between the end of the asset purchase program, which it never called quantitative easing, and the first hike, is now called “patience”.
After several months of dismissing disinflationary trends, the European Central Bank has affirmed that it will do whatever it takes to reach its inflation target.
After prices fell in the Eurozone by 0.1% on a month-to-month and 0.2% on a year-to-year basis, the European Central Bank announced a 1.1 trillion euro asset-purchasing program last week aimed at raising inflation expectations. One day after the announcement, ECB executive board member Benoit Coeure said the quantitative easing program would extend if inflation fails to reach 2%.
As the demonizing of Syriza gives way to post-electoral analysis, its victory appears anti-austerity, not anti-EMU. Politics makes for strange bedfellows, and a small conservative party, Independent Greeks, have agreed in principle to form a coalition. The period of political uncertainty that was a clear risk will not materialize, with a quick swearing in of a new government.
Reasonable people can debate some of the details, but there was little doubt that last week’s big event, the ECB’s asset purchases, was widely anticipated. Nevertheless, what is striking is the repeated surprises by officials over the past several months.
