Atlantic Divergence in Monetary Policy as US Economy Outpaces EU

by Global Risk Insights
Financial Sense

In the short-term, the Fed may need to consider global factors when formulating policy. But over a longer horizon, a greater focus on domestic conditions means that the Fed may go down the road less traveled by raising interest rates from record lows, while European central banks and the Bank of England retain near-zero rates for longer.

Since the UK voted to leave the European Union on June 23rd, there has been growing debate about a possible backlash against globalization. However, the realm of monetary policy appears to be immune to this trend for now.

Concerns over the effect of the referendum appear to have influenced the Federal Reserve’s actions. The last time the Federal Reserve’s Open Market Committee (FOMC) met was the week before Brexit.

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