While ECB struggles, Fed sees recovery

Sun Sep 28, 2014 5:15am EDT
 
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By William Schomberg

LONDON (Reuters) - On one side of the Atlantic they're trying to refill the punchbowl. On the other they're getting ready to take it away. This week, investors may get a clearer idea why.

The European Central Bank will spell out on Thursday its latest attempt to steer the euro zone away from the prospect of damaging deflation, following the latest snapshot of consumer price pressures on Tuesday.

U.S. jobs numbers on Friday will probably confirm that the fast-recovering American economy has reached the point where the Federal Reserve can finally halt its massive bond-buying stimulus.

The contrast between the U.S. and euro zone economies has grown increasingly stark, adding to the pressure on the ECB and European leaders to revive growth in their corner of the world.

U.S. Treasury Secretary Jack Lew last week laid bare Washington's long-standing frustrations with the reluctance of European governments to increase public spending.

The risk of the euro zone sliding into deflation and deeper stagnation is adding to the drag on the global economy from a slowdown in China, where authorities are trying to rein in lending, and concerns about conflict in the Middle East.

But instead of fiscal action by European governments, it is action by the ECB that is the most likely spur for the region.

After surprising markets with an interest rate cut at its September meeting and trying to get banks to take cheap loans to boost lending, the ECB on Thursday is due to give details of its plan to unblock corporate credit by buying repackaged loans.   Continued...

 
An "Assembled in the USA" stamp is seen at the side of a box containing a 32-inch television set in the warehouse of Element Electronics, in Winnsboro, South Carolina in this file photo taken May 29, 2014.  . REUTERS/Chris Keane/Files