Fed’s Barr Sees More Adjustment Ahead as China Keeps Policy Moderately Loose
Central bank officials in Washington, London and Beijing set out their policy direction this week. Federal Reserve Governor Michael Barr said on 23 September that, in his base case, further policy adjustments are likely to be needed, the Bank of England’s Deputy Governor Clare Lombardelli said on 24 September that policy will be tightened further if needed, and the People’s Bank of China said it will continue its moderately loose monetary policy.
| Central bank | Official or body | Date | Signal |
|---|---|---|---|
| Federal Reserve | Governor Michael Barr | 23 Sep | Base case: further adjustments likely needed |
| Bank of England | Deputy Governor Clare Lombardelli | 24 Sep | Tighten further if needed |
| People’s Bank of China | Monetary Policy Committee | 19 Sep meeting, published 24 Sep | Continue moderately loose policy |
Washington: inflation not yet on track
Barr said inflation is above the 2 percent target and “not clearly trending toward target in a timely way”, and that risks to the inflation goal have increased while risks to the labour market have receded. He supported the rate increase the Federal Open Market Committee made the previous week.
London and Beijing
Lombardelli set out how the Monetary Policy Committee is monitoring the effect of recent energy price increases on inflation. The Bank’s summary of the speech says policy “is already leaning against the risk of persistent inflationary pressures” and will be tightened further if needed. In Beijing, the central bank’s committee called for stronger counter-cyclical adjustment, ample liquidity, attention to changes in long-term bond yields, and a renminbi kept basically stable at a reasonable and balanced level.
Why it matters: On our reading, the statements underline contrasting settings: Barr sees further adjustment as likely after the Fed’s September increase, the Bank of England says policy will be tightened further if needed, and the People’s Bank of China continues to describe its policy as moderately loose.
Outlook: The Fed’s next policy meeting is on 27 and 28 October.
Sources: Federal Reserve, Bank of England, People’s Bank of China.
