ECB, BoE officials see inflation rising
Stronger growth will pull inflation higher in the U.S. and Europe, according to three top central bankers who voiced confidence that their regions will escape from headwinds that are keeping inflation too low.
Federal Reserve Vice Chairman Stanley Fischer joined European Central Bank Vice President Vitor Constancio and Bank of England Governor Mark Carney on a panel at the Kansas City Fed's annual retreat in Jackson Hole, Wyoming, dedicated to discussing inflation dynamics. Their optimism has not been shared up until now by investors, trading in inflationprotected bonds shows.
"Given the apparent stability of inflation expectations, there is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further," Fischer said in his prepared remarks.
"With inflation low, we can probably remove accommodation at a gradual pace," Fischer said. "Yet, because monetary policy influences real activity with a substantial lag, we should not wait until inflation is back to 2 percent to begin tightening."
While Fischer has left open the option of an interest-rate increase when policy makers meet next month, he didn't express a preference for acting that soon.
"I do not plan to upset your rational expectation that I cannot tell you what decision the Fed will reach by Sept. 17," he told the symposium today.