While GDP growth is rebounding, wages and, therefore, inflation remain subdued. That was the main conclusion of the International Monetary Fund’s annual conference concluded on Sunday.
Among others, the Conference was attended by the Presidents of International Monetary Fund, the World Bank, the Chairwoman of the U.S Federal Reserve, and the Presidents of the European Central Bank and the Bank of Japan.
The Chairwoman of the Federal Reserve, Janet Yellen, insisted that interest rate rises would be “appropriate” in the medium term, as inflation is the “biggest surprise in the U.S economy this year,” the Wall Street Journal reports. US inflation in August was barely 1,4%, that is, well below the 2% target.
The US Federal Reserve has raised interest rates four times since December 2015, while the European Central Bank and the Bank of Japan are still engaged in a quantitative easing programme.
Mario Draghi is also facing pressure to stop the two trillion Euros asset-buying programme. The ECB will decide on October 26 on whether to decelerate its asset-buying programme. Many of the critics of quantitative easing argue that liquidity has inflated the price of assets, including stocks and real estate. On Sunday, Draghi insisted that the policy was yielding results.
The Vice President of the European Central Bank, Vitor Constancio, expressed called the decoupling of economic growth and wages “puzzling,” expressing confidence in ECB policy.