Oil Slump Worsens Lowflation Risks Central Banks Can’t Ignore - Bloomberg:
Global central banks already struggling to spur inflation amid the spreading coronavirus are facing a fresh challenge -- the oil crash.
The price war between Saudi Arabia and Russia that has given crude its worst week since 2008 will put heavy downward pressure on inflation just as the coronavirus outbreak hits consumer spending. It’s undoing the years of effort that monetary authorities have put in, along with trillions of dollars of stimulus, trying to hit their price-stability targets.
The question now is whether they have the capacity to respond as strongly as needed. Market-based gauges of future inflation have slumped, suggesting that investors doubt they can, or that governments will provide sufficient support.
Central bankers tend to skirt over energy-price shocks if they think they’ll be temporary, pointing instead to “core” inflation measures that exclude volatile components. After so many years of low inflation despite massive monetary stimulus, though, there’s a risk that companies and households decide this is just the latest sign that prices will stay flat.
Global central banks already struggling to spur inflation amid the spreading coronavirus are facing a fresh challenge -- the oil crash.
The price war between Saudi Arabia and Russia that has given crude its worst week since 2008 will put heavy downward pressure on inflation just as the coronavirus outbreak hits consumer spending. It’s undoing the years of effort that monetary authorities have put in, along with trillions of dollars of stimulus, trying to hit their price-stability targets.
The question now is whether they have the capacity to respond as strongly as needed. Market-based gauges of future inflation have slumped, suggesting that investors doubt they can, or that governments will provide sufficient support.
Central bankers tend to skirt over energy-price shocks if they think they’ll be temporary, pointing instead to “core” inflation measures that exclude volatile components. After so many years of low inflation despite massive monetary stimulus, though, there’s a risk that companies and households decide this is just the latest sign that prices will stay flat.
No comments:
Post a Comment