The European Central Bank’s Next Move Makes it Harder for Fed to Raise Rates
Analysts project that the European Central Bank will keep its zero interest rates for a lot longer, the Washington Post reports.
This makes it harder for the United States to raise rates. “That suggests the Fed would be better off waiting to raise rates until there is some actual evidence inflation is rising—especially now that the ECB might cut them,” writes Matt O’Brien, reporter for the Washington Post’s Wonkblog covering economic affairs.
According to O’Brien, raising rates will make the dollar even more expensive against the Euro, decreasing the competitiveness of American exports. But he is quick to add that a stronger dollar itself wouldn’t have to mean that the economy would be weaker.
Though the high price of American products in this case could offset by the fact that more monetary stimulus would make Europe demand more goods from the U.S., still, long-term interest rates would be rising.
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