Follow Joshua McCallum
The UK economy has exhibited various puzzles recently; the latest of these is the conundrum of core inflation. Core inflation is made up of services inflation and non-energy industrial goods inflation. When we look at the drivers which should be influencing these two components, something does not seem to add up.
Business investment spending in the US has started to pick up but what is often unappreciated is that most of investment spending is simply replacing ageing equipment. Spending on new capital goods to actually expand capacity remains extremely low, and will need to rise if the US economy is to grow properly once more.
The ECB announced the Targeted Long-Term Refinancing Operation (TLTRO) in June as one of its measures to stimulate lending. The TLTRO is very similar to the Bank of England’s Funding for Lending Scheme (FLS), although the TLTRO’s terms are actually more advantageous for banks than those of the FLS. It looks like the ECB has tried to learn from the Bank of England’s experience, but it will take some time for TLTRO to have a discernable impact.
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