The world's central banks will follow the Federal Reserve's example

The US Federal Reserve – America's central bank – has said that it would become more tolerant of inflation and hold interest rates down. Others will follow.

Bank of England Governor Andrew Bailey © ANDY RAIN/EPA-EFE/Shutterstock
Andrew Bailey: negative interest rate policy is “in the tool bag”
(Image credit: © ANDY RAIN/EPA-EFE/Shutterstock)

The new era of global central banking is well and truly underway, says Howard Davies on Project Syndicate. Last month Jerome Powell, the chair of the US Federal Reserve, announced that the central bank would become more tolerant of inflation passing temporarily above the 2% target. Last week, the Fed held interest rates close to zero and signalled that they will stay there until the end of 2023.

The new dovishness has been prompted by persistently low US inflation, which has undershot the target 63% of the time over the past decade. Where the Fed leads others will follow. The European Central Bank is currently conducting its own policy review. Some are keen for the Bank of England to follow, but matters are more complicated for the UK: thanks to the persistently weak pound, “average inflation has been more or less on target” in recent years.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Markets editor

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019. 

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere. 

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful. 

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.