Finding equilibrium in a non-cooperative world

OpinioPro Selection
By January 16, 2020 06:48

Finding equilibrium in a non-cooperative world

Special editio: 2020 Outlook

T he central banks are set to pursue monetary accommo- dation right throughout 2020, reluctant to risk curbing the world economy, which continues to de- velop at a pedestrian pace with no ex- pectations of a swift upturn in growth. The world of today is less cooperative and the approach is less coordinated, as reflected in the United States’ trade policy and the surge in populism in both developed and emerging coun- tries. So it would be misguided to ex- pect a major fiscal stimulus plan on a par with the G20’s efforts in London in April 2009 to set growth on a stronger track.

Accommodative monetary policy helps keep a lid on risks, and this is particu- larly vital when we consider ongoing moderate price rise projections that are unlikely to trigger a quickening in inflation. Wage trends look unlikely to put a sufficient squeeze on corporate margins to push up sales prices, while the impact of competition is such that companies’ ability to hike prices is also curtailed. This no-show for inflation also prompts the central banks to stick to their unrestrictive approach: the ECB has not managed to hit its infla- tion target over the past several years so it has no reason to take a tougher approach and risk potential deflation. 

 

OpinioPro Selection
By January 16, 2020 06:48

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