Growth, Inflationary Risk, and Euro Area Reforms – My Monday column

World growth has stopped accelerating and hit a plateau, inflationary risk is now more visible in investors’ behavior, and the ECB is advocating urgent reforms to the euro area’s institutional framework in order to make it more resilient.

After an acceleration in the last quarter of 2017, is world growth hitting a plateau? This is what manufacturing sector Markit surveys seem to suggest. The swift growth seen right throughout 2017 has ground to a halt, and while indices all stand at admittedly impressive levels reflecting swift growth in economic activity, they are no longer rising.

The global index was flat in January at 54.4 vs. 54.5 in December. This figure is very useful as it acts as a leading indicator of world trade trends. The relationship between the two metrics is important and world growth was so extensive and uniform precisely because this correlation worked well again in 2017. In this respect, monetary policy accommodation across the globe was a prerequisite for a recovery in growth, and in 2017 provided sufficient impetus to truly spark it off. Continue reading

Inflation expectations upset the Federal Reserve

Written with Aline Goupil Raguénès

Last week, during her speech at the Congress, Janet Yellen, the president of the Federal Reserve, highlighted the importance of inflation expectations stability. Stability is key in the design and calibration of monetary policy.

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Nevertheless, when we look precisely at these expectations, there are doubts on their stability in the current period. Continue reading