U.S. Outlook: Deflation fight moves overseas
Global central banks from Europe, Canada, Peru, Switzerland, Denmark, and India all made moves this month to loosen monetary policy and head off economic and deflation risks.
For a detailed look at this and other developments, see my full weekly analysis. Highlights are outlined below, followed by a link to the full U.S. Outlook report, delivered on Jan. 23.Key observations:
- A weaker euro will bolster Europe’s exports, tourism, and transportation industries, while helping to stabilize Eurozone prices.
- The European Central Bank’s (ECB) recent actions reduce the risk of financial contagion from the Eurozone to the U.S., which solidifies our outlook for a relatively robust U.S. economy this year.
- The ECB decision Thursday makes a Fed mid-2015 liftoff date for the Fed funds target rate more likely.
- Even if oil prices lead to a temporary bout of deflation here in the United States, it won’t last and is not likely to lead to adverse outcomes for domestic demand.