Global inflation appears tamer than many had thought it would be by now, still held back by a modest outlook for economic growth, meaning central banks look likely to leave rates lower for longer — or even ease policy further.
With a few exceptions such as Brazil, many major economies are still generating low or no consumer price inflation but instead higher asset prices, particularly stocks, and in many countries, a renewed pickup in house price inflation.
For those watching the world economy, China, not Greece, has for a while remained the number one concern.
The panic by the Chinese authorities last week as they went through tool after tool to halt the stock market's fall after a massive boom suggests serious concern about damage to a slowing economy that is generating just 1.4 percent inflation.
While growth is only expected to slow to 6.9 percent from 7.0 percent in the official data due this week, many suspect there is a much sharper economic slowdown. The recent sharp fall in oil prices reflects that view.
That said, Chinese citizens have much greater exposure to the housing market than to stocks and for now, the authorities appear to have successfully engineered a stock market rebound.
But for the economy, the growth momentum is still headed the other way. Jeremy Lawson, chief economist at Standard Life Investments, writes that "the long-term glide path is still down and most of the risks remain to the downside."
"Slow growth and moderating inflation explains why many emerging economies have been loosening monetary policy in recent months ... (but) there is a danger in taking things too far."
The inflation outlook for the United States also remains remarkably tame, particularly given how quickly the unemployment rate has fallen but still with no convincing evidence that has translated into significantly higher wage deals.
While some large investment banks remain upbeat about prospects for U.S. growth in coming months, forecasting a much stronger second half for the world's largest economy has become boilerplate since the financial crisis began to ease.
YELLEN IN CONGRESS
Federal Reserve policymakers were clear in minutes of the June policy meeting that they had a close eye on economic growth abroad, particularly in China and other emerging markets.
Traders and investors in financial markets, who already had pushed to September from June expectations for the first U.S. interest rate rise in nearly a decade, are now talking about December or even not until 2016.
Testimony from Fed chief Janet Yellen to Congress on Wednesday and Thursday could provide more clarity on how close the Federal Open Market Committee is to raising rates from a record low of 0-0.25 percent, but few expect strong signals.
"We still believe the FOMC majority is anxious to lift policy off the zero bound when the opportunity arises, preferably before year-end," wrote economists at Credit Suisse who have changed their forecast to just one hike this year.
"However, the urgency to tighten has diminished somewhat," they wrote, citing the rising threat of risk aversion in financial markets and tame wage inflation.
In the euro zone, which has managed to escape from deflation partly through hefty insurance in the form of 60 billion euros a month in bond purchases by the European Central Bank, inflation still remains dangerously close to zero.
The latest data due this week is expected to show just 0.2 percent consumer price rises compared with a year ago and there is almost no prospect for a return to the 2 percent target ceiling either this year or next.
Staff at the ECB, which meets this week to set policy, predict inflation will average just 1.5 percent next year, rising slightly to 1.8 percent in 2017.
And Britain, which historically has had no difficulty generating higher inflation than its main European trading partners, is expected in the latest Reuters poll to report that it eased back to nil in June from just 0.1 percent.
British inflation has started moving closer to the lowest forecasts in these surveys, underscoring how far it has to go up to reach the 2 percent target as the Bank of England predicts it will do by 2017.
The Bank of Japan meets this week and is likely to trim both its outlook for growth and inflation, with expectations intact for more stimulus later this year.
The Bank of Canada also meets, with rates expected to remain at 0.75 percent. The risk of stoking a re-heating housing market with even cheaper borrowing costs appears to outweigh the risk the economy has already slipped into recession.
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