The central bank has signaled it may hold further fire until it can evaluate the effects of a sales-tax increase timed for April. After that, policy makers probably will amplify stimulus in the second quarter, according to 20 of the 34 economists surveyed by Bloomberg News last month.
Emerging markets, which have been in danger of overheating, mostly have welcomed the fall in global inflation, JPMorgan’s Kasman said. That’s enabled their central banks to take action to boost their economies.
“It allows more policy flexibility in that part of the world where we need growth leadership, and that is the emerging world,” Pierpoint’s Sinche said.
Brazil, India and Turkey nevertheless will probably continue to tighten policy as falling currencies fan prices, according to Harris. Indonesia unexpectedly raised its key rate 25 basis points yesterday to 7.5 percent to contain inflation and shore up the rupiah.
Other developing nations may act to keep their currencies from rising too much. The Czech Republic last week intervened in foreign-exchange markets to weaken the koruna, and Peru cut rates as exports slow.
While the aggressive actions that central banks have taken haven’t done all that much for global growth, they have boosted asset values worldwide, pushing home prices from Canada to Australia and Sweden to China to levels that may turn out to be unsustainable. Some Fed officials have pointed to costlier homes, farmland and bonds as causes for concern.
“We’ve seen real bubble-like markets again,” Laurence D. Fink, chief executive officer of BlackRock Inc., the world’s largest money manager with $4.1 trillion in assets, said at an Oct. 29 panel discussion in Chicago.