IW monetary outlook October 2015. Low inflation: A challenge for central banks

Arbeitspapier

The European Central Bank (ECB) as well as the Federal Reserve Bank (Fed) are currently challenged by inflation below their inflation targets. While the Eurozone recovery is still anemic, the US economy is growing and the labor market improved, such that the Fed now fulfills one target of its dual mandate of stabilizing inflation and maximum employment. While consumer price inflation is low in the US, core inflation remained stable in during the last year. Because of the improved labor market towards near full employment we expect the Fed to conduct an interest rate lift-off. Given the current effective federal funds rate of 0.14 percent, an increase of the federal funds target corridor to 0.25 to 0.50 percent in December 2015 seems possible without endangering growth. It will be a strong signal that the Fed is confident that the economic recovery is strong enough to bring inflation back to its target value in the next year. However, we expect the Fed to abstain from further interest increases until the second half of next year due to the still low inflation rate. [...]

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IW Policy Paper ; No. 33/2015E

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation ; Monetary Policy ; Central Banks and Their Policies

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hüther, Michael ; Demary, Markus
• Event: Veröffentlichung
• (who): Institut der deutschen Wirtschaft (IW)
• (where): Köln
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/123705
• Last update: 10.03.2025, 11:44 AM CET