Fed and ECB play down inflation concerns as global markets sell off
JAMES POLITI — WASHINGTON COLBY SMITH — NEW YORK MARTIN ARNOLD — FRANKFURT
Senior US and EU policymakers yesterday sought to play down inflation fears as global markets sold off amid mounting concerns that rising consumer prices would prompt central banks to tighten monetary policy.
Lael Brainard, a Federal Reserve governor, called on the US central bank to be “patient” in pursuing its ultra-loose monetary policy, dismissing inflation worries while highlighting “uneven” improvements in the labour market.
Her comments suggest the Fed is not ready to begin discussing its first steps to removing support for the pandemic-hit US economy, even as growth picks up and consumer prices start to rise. They also indicate that senior Fed officials viewed April’s poor jobs report as reinforcing concerns that the acceleration in the US recovery this year remained uneven and fraught with uncertainty.
Fears are growing that sustained high inflation could force the Fed to reduce its $120bn of monthly bond purchases, which have boosted financial assets since last March.
Europe’s Stoxx 600 index closed down 2 per cent, while Tokyo’s Topix slid 2.4 per cent and Hong Kong’s Hang Seng dipped 2 per cent. The FTSE 100 fell nearly 2.5 per cent.
The tech-heavy Nasdaq pared back morning losses of about 2 per cent to be down 0.6 per cent in midday New York trading. The S&P 500 slid 0.9 per cent.
“Inflation is creating a lot of fear among investors because of the possibility that the central banks are not ready to deal with it,” said Aneeka Gupta, research director at WisdomTree. Data to be published today is expected to show that headline consumer prices in the US rose 3.6 per cent in April from the same month last year.
“But we could get to the point where the Fed and other central banks suddenly have to do something about inflation and they could move faster than they have so far indicated that they will,” Gupta said.
Isabel Schnabel, an executive director at the European Central Bank, sought to soothe concerns about an expected rise in German inflation above 3 per cent this year, saying it was unlikely to cause a tightening of monetary policy. “Our monetary policy strategy is medium term and that means we look through all of these short-term fluctuations,” she said yesterday
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Articolo tratto da “Financial Time” del 12/05/2021