Fall in oil prices likely to widen divergence in monetary policies

Frankfurt

THE world's major central banks are scrambling to work through the implications of the near halving of the price of oil in the second half of 2014, and they are coming up with very different conclusions.

Perhaps unsurprisingly, policymakers looking at robust economic recoveries such as in the United States and Britain are focused on the likely boost to growth and consumption from markedly lower energy prices and the later upward impact that should have on inflation.

But for the European Central Bank (ECB), battling to revive a moribund economy, the worry is whether cheap oil could tip the eurozone into outright deflation.

As a result, low oil prices will likely widen the gap in monetary policy stances around the world, with the Federal Reserve mulling over the timing of a first interest rate rise while the ECB gets close to making the leap into bond-buying…