The Chicago Federal Bank President, Charles Evans, said on Tuesday that the low inflation point is a bit scary, as, through a potential rise in the disruptive corporate deal-making, the central bank could be knocked off the current rate-hiking schedule.
Evans did not mention any particular mergers or acquisitions, but he did say that transformative moves can strain inflation, which, then, can slow the Federal Bank from what it calls “its policy normalization”. His biggest fear is inflation.
His main fear is that in the world of global market and new competitors and technology, competition comes from different places. They merge and change the marketplace, which brings “more competitive pressures on price margins”, said Evans in a CNBC interview.
“If that’s the case, and I think that’s just speculative at this point, then it means that we need even more accommodation to get inflation up,” he further said.
The main two goals of the Federal Bank are to increase the current low inflation percent up to 2%, for price stability, and to reach maximum employment. And while the unemployment rate has dropped to 4.3% during the Bank’s aggressive moves since the financial crisis, the low inflation percent has remained un-stabilizable.
This comes in as a worrying news, especially since Amazon has made it known that it intends to buy Whole Foods, the largest whole-sale food retailer. This comes as a shocking news, and it has since plummeted the market. Which, in return, makes the attempts to increase the low inflation percent quite hard to manage.
The Chicago Federal Bank’s President as stated that, if there will be more signs of downward pressure on the already low inflation percent, it will be an indicator that there’s more to be done in order to get inflation up.
The rationale behind this is that if the low inflation percent continues to go downward, although pricing would reduce, consumers might be reluctant to spend. Thus, decreasing both economic growth and earnings.
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