Commentary
The European Central Bank (ECB) has made the Federal Reserve’s (Fed) job harder. After dangerously ignoring inflation for months, Fed Chairman Jerome Powell has at last adopted an anti-inflationary policy stance.
The Fed will gradually unwind its former practice of directly buying securities on financial markets—what central bankers refer to as “quantitative easing.” Sales from the hoard of securities built up in past buying will siphon inflationary liquidity from financial markets and the economy. Policymakers have also begun what looks like a long string of interest rate hikes.
Many see these steps as too little, too late. Still, the ECB’s decision to take no anti-inflationary action will make the Fed’s fight that much harder and promises to inflict price pressures in both Europe and the United States for longer than otherwise.
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