Being out of step also focuses attention on the fact that the ECB is in danger of losing control over inflationary expectations. The US Federal Reserve can cut 100 basis points from the federal funds rate and not lose control over US inflationary expectations.

Higher rates would have meant lower inflation, so that inflationary expectations would not be the issue they have become.

Moreover, ECB chief economist Otmar Issing predicts long term interest rates would go up not down as inflationary expectations increased.

Finally, by demonstrating a willingness to print money, the Fed hopes to increase inflationary expectations from their current low levels.

If a government attempts to push the unemployment rate too low, inflation will increase, and so, too, will inflationary expectations.

At this point, inflationary expectations will increase, long term government bond yields will rise, and the recovery will be crowded out.

And, if inflationary expectations become embedded in an economy, it may be impossible for any of the three cures to work.

Spillover effects are inevitable, and once a corrosive increase in inflationary expectations sets in, it becomes all the more painful to unwind.

Nevertheless, there is some concern that growing inflationary expectations might result in rising long term interest rates, offsetting the benefits of the stimulus.

The longer energy prices remain at their current lofty levels, the greater the probability that inflationary expectations will increase and that second round effects will materialize.

Any attempt to use expansionary government policies to drive unemployment below a certain level, they demonstrated, would fuel inflationary expectations and undermine both economic growth and employment.

In the midst of the most serious financial crisis in recent memory, the ECB has resorted to an unconvincing bluff, because it has an inflationary expectations problem.

Inflationary expectations, as measured by the rates on certain market instruments, actually fell after the hike, indicating increased confidence that the ECB will keep a lid on price pressures.

Inflationary Angst

When that happens, inflationary expectations will mount, long term government bond yields will rise, mortgage rates and private market rates will increase, and one would end up with stagflation (inflation and recession).

Moreover, ECB chief economist Otmar Issing predicts long term interest rates would go up not down as inflationary expectations increased. So cutting interest rates would not only be stupid it would be crazy.

Critics suggest that QE2 is really intended only to create inflationary expectations and thus encourage acquisition of more risky assets by reducing rates on Treasury bills with longer term maturities (5 7 years and 7 10 years).

1. Strongly anti inflationary monetary policy.

China is now facing inflationary pressures.

1. Strongly anti inflationary monetary policy.

Chinese investors are worried about inflationary overheating.

As European growth slows, so will inflationary pressures.

After successful experiments in smaller economies, New Zealand in 1990 and then Canada in 1991, and later in Sweden and the United Kingdom, the conviction developed that the new approach represented a superior way of dealing with the problem of inflationary expectations.

The ECB should drop its inflationary bias because the European economy is weakening, and the weaker economy will contain whatever inflationary pressures now exist.

Seminar expectations

Higher domestic consumer spending would otherwise create inflationary pressures.

He has also worked successfully to contain inflationary pressures.

The best cure would be controlled higher inflation that is, the aforementioned temporary increase in the inflation target to erode the real value of public debt and forestall the risk of a much more damaging inflationary shock later, one in which expectations become unhinged.

Goals and expectations

Consider, next, whether the inflationary cure would work as advertised.

The dreaded inflationary endgame suddenly looms as a very real possibility.

It will be difficult to ease these inflationary pressures this year.

Others have lower expectations.

The expectations are high.

The world became much more inflationary, and quite a bit more protectionist.

Such price increases can prove particularly inflationary in countries that import commodities.

Great Expectations for the Renminbi

An Age of Diminished Expectations?

The Summit of Low Expectations

Such expectations are patently unrealistic.

The world's expectations are high.

Hence, their expectations were met.

Our expectations are indeed minimal.

Nor is it inflationary if the wage increases are financed by higher taxes.

In normal times, the Fed s response extremely monetary stimulus would be highly inflationary.