JEREMY HOBSON: In Europe today officials are meeting to discuss the bailout details for Portugal. The country announced it needs about $100 billion in assistance just as the European Central Bank decided to raise interest rates, making it more expensive to borrow.
Chris Low is chief economist with FTN Financial. He’s with us live from New York as he is every Friday. Good morning.
CHRIS LOW: Good morning.
HOBSON: So Chris, people are saying that these rises in interest rates around the world mean the beginning of the end of cheap money.
LOW: Well, that’s right. You know, we’ve had the easiest policy, monetary policy anyway, worldwide in this cycle than we’ve ever had before. But we’re moving away from it now. This is the start, it’s the first of the big industrialized countries to raise rates.
HOBSON: Any sense that the Fed here in this country is going to do the same kind of thing?
LOW: No, I don’t think so. In fact the Fed is still easing. They’re still doing their quantitative purchases of bonds.
HOBSON: Right. Now, Chris does this mean that central banks around the world are basically deciding, that we’ve got to worry about inflation at this point and if you’re still in financial trouble, you’ve missed the boat?
LOW: Yeah, it does. And so, thankfully the Fed is in an easier place because a lot of the inflation in the U.S. is coming from overseas. The tightening by other central banks means we don’t have to tighten as quickly but there will come a point when the Fed does have to focus on inflation again. And because there are literally still millions of long term unemployed who don’t see any job prospects at all, at some point they’re going to be left behind because policy can only work in the aggregate. That is the Fed has to aim at the country in general, they can’t help specific individuals.
HOBSON: Chris Low, chief economist with FTN Financial, thanks so much as always.
LOW: Thanks, good to be here.
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