Central Banks Fighting Deflation Worldwide

Central banks in Europe, Japan and  the U.S. are fighting deflationary forces by easing monetary policy and financing government debt.  This may change their roles and expectations in the future as they move closer to the areas of fiscal policy which governments are incapable of setting for themselves.

“It is important to recognize that the role of an independent central bank is different in inflationary and deflationary environments,” Bernanke said. In times of deflation, “a more cooperative stance on the part of the central bank may be called for.”

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