The turbulence in financial markets in the middle of October won’t have a major impact on monetary policy in developed economies. We do not think it is a sign that the world is heading for another recession. Even the slump in oil prices, which we suspect will be sustained, should have less impact on monetary policy than many expect, because it will primarily affect headline inflation. Having said that, lower oil prices are yet another reason for the ECB and BoJ to ease policy further because of the risk of deflation in the euro-zone and Japan.
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