US Fed Chair Janet Yellen speaks with European Central Bank President Mario Draghi in Jackson Hole in 2014. Photo: Reuters / David Stubbs

The US Federal Reserve is expected to start tapering in October, and we will likely hear more when policy makers meet in September at Jackson Hole.

The Fed is still convinced by its models that inflation will eventually pick up, ignoring that fact that the models may be wrong.

The hawks on the European Central Bank have been encouraged by the fact that the Fed has started talking about tapering, and the bank will probably go in the same direction but will wait to see what happens in the US.

German elections are coming on September 14, close to the September Fed meeting, and any more serious ECB moves driven by pressure from Germany will have to wait.