The Federal Reserve is not the only major central bank facing tricky policy challenges. Thursday's monetary policy meeting in Frankfurt will serve as a reminder that the European Central Bank (ECB) also confronts a complex policy dilemma—and this in the context of a general policy direction that potentially widens the disparity in the approaches taken by the two most systemically important central banks in the world.
The major issue facing ECB policymakers relates to the desirability of a new round of policy easing that would involve greater use of balance sheet operations via quantitative and/or credit easing. This would supplement the central bank's forward policy guidance on interest rates.
Read MoreIMF warns on low inflation, calls on ECB to act
The major questions relate to whether, when, how and, most importantly: How effective would it be? And none of them have easy answers.
The immediate catalyst for additional ECB measures, experimental as they are, is the recent downward trajectory in inflation. The particular concern is the potential dampening effect on growth and confidence, together with the risks of an over-appreciated currency—that is to say, the threat of "Japanization."