The world’s two most powerful central bankers are nearing a transatlantic gap in monetary policy as the Federal Reserve debates raising interest rates while the European Central Bank signals more stimulus.
The potential for divergence was on display yesterday as Fed Chair Janet Yellen and ECB President Mario Draghi outlined differing economic outlooks to international counterparts in Jackson Hole, Wyoming. The U.S. unemployment rate stands at 6.2 percent compared with 11.5 percent in the euro area.
Yellen said with their labor markets healing, U.S. central bankers are shifting to debating when “we should begin dialing back our extraordinary accommodation.” By contrast, Draghi said officials “stand ready to adjust our policy stance further” while adding that investor bets on the bloc’s inflation have “exhibited significant declines at all horizons” in August.
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