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Inflation on the agenda at Fed and European Central Bank

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The indications of rising inflation in Europe and the US have prompted deliberations, in both official and media circles, over how the world’s two major central banks, the European Central Bank and the Federal Reserve, could start to pull back the extraordinary levels of support they have provided to financial markets.

The two central banks are being caught on the horns of a dilemma. On the one hand, they fear that even a limited withdrawal of support could set off major financial turbulence. On the other, if the ultra-loose monetary policy continues, under conditions where inflationary pressures become entrenched, they could be forced to clamp down hard, causing even bigger problems.

Chairman of the Federal Reserve Jerome Powell (AP Photo/Susan Walsh)

So far, the official view at the Fed and the ECB is that the recent rise in inflation is transitory, and the present levels of support should be maintained.

But there are concerns that the uptick in…

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