Central Banks Likely to Make Policy Errors: Deutsche Bank Survey

The Federal Reserve and the European Central Bank are likely to keep policy settings too loose while the Bank of England will probably err on the hawkish side, most respondents told an October market sentiment survey conducted by Deutsche Bank. The Fed has been moving closer to rolling back its $120 billion in monthly asset purchases but the pace and timing remains unsettled as officials have expressed concern about tension between the sharp run-up in inflation and weaker labor market recovery signals, challenging policymakers as they seek to thread the needle of the Fed’s dual mandate of maximum employment and price stability. Inflation in the United States has surged to 30-year highs, while other parts of the world are also seeing intense price pressures. Central bank officials remain adamant that the current inflationary spike is temporary and, once supply chain dislocations abate, prices will settle back down to target, typically around …

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