Some pundits are already demanding that those institutions up the ante – calling, for instance, on the ECB to go beyond sovereign bond purchases and start buying stocks as well.
Others are asking whether Mario Draghi, the ECB’s outgoing president, will “bet the farm” in one last bid to rekindle GDP growth and inflation expectations.
Central bankers, it must be said, are still in the dark about why there is no inflation today, and that mystery will no doubt keep our economist-detectives busy this summer.
How indeed do you explain that the United States is enjoying practically full employment with wages trending upward, while inflation expectations have yet to get off the ground?
Are the deflationary impact of globalisation, the spread of casual, unqualified service jobs in the United States and the “Amazonification” of retail enough to thwart all the efforts made by central banks?
Or could the solution to this enigma be that the all-powerful consumer can now impose low prices that force companies to sacrifice profit margins in order to cover the cost of rising wages?
If so, then downward pressure on margins will only drive businesses’ already low capital spending down further, thereby making anaemic growth a lasting feature of the world economy.
The fear that this may be true is probably what has emboldened the United States to exploit its favourable balance of power with trading partners to grab the largest slice it can of a shrinking global economic pie.
In any event, financial markets have clearly lost their illusions.
The unequivocal flight of investors to growth stocks and bonds reflects their almost unanimous, resigned conclusion that the economy is running on empty, inflation is a thing of the past and rock-bottom interest rates are here to stay.
But that might just be where we are in for a surprise this summer, because as Sherlock Holmes so aptly put it: “There is nothing more deceptive than an obvious fact.” The suspense is on.
Didier Saint-Georges is managing director at Carmignac
