The European Central Bank cut interest rates. What does that mean for the Fed?
The European Central Bank cut interest rates. What does that mean for the Fed?
As the Federal Open Market Committee prepares to meet next week to make a decision on what to do with interest rates, do they have their eye on other nations’ economic decisions? Probably not.
In fact, Jay Bryson with Wells Fargo said the European Central Bank cutting interest rates has zero implications on what the Fed does next week.
“They’re very much focused on domestic conditions here in the United States,” he said.
European interest rates won’t impact U.S. job growth or prices.
“Our economic ties with the eurozone, you know, as a percent of the our overall economy, are relatively small,” Bryson said.
We’ll know more about how we’re doing after tomorrow’s jobs report, and when the consumer price index is out next week. Even so, nobody expects the Fed to be cutting interest rates at the June 12 meeting, Bryson said.
He said if those reports show sluggishness, cuts may be on the table — but not until September. And even further out if the economy shows more strength.
Monetary policy really is about the long game.
“If you think of the U.S. economy, I always like to think of a great big, gigantic ship with a little itty, bitty tiny rudder. And that tiny rudder is monetary policy. And so it takes a long time to turn that ship,” said Logan Kelly, the economics department chair at University of Wisconsin-River Falls.
The U.S. ship and the European ship have been gliding across the sea at different paces.
“U.S. economy is a little bit stronger,” Kelly said.
And V. V. Chari, an economics professor at the University of Minnesota, said while there are some signs of softening, there’s “nothing widespread enough to raise significant concerns that the U.S. economy is going to enter a recession in the near term.”
Here in the U.S., we’re still in the “bringing down inflation” phase.
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