US interest rate cycle set to turn

The Federal Reserve — the US equivalent of the European Central Bank — has pursued a policy of zero interest rates for a long period as it sought to lift the economy out of the morass left over from the implosion of the US subprime mortgage market eight years ago.

US interest rate cycle set to turn

Foryour average central banker, having interest rates at such low levels is not normal, nor does it make them comfortable. The one thing all central bankers fear, to varying degrees, is inflation, with the occupants of the ECB in Frankfurt particularly paranoid on that score.

However, all central bankers have come to realise since the commencement of the ‘great recession’ in 2007 that unorthodox policies would have to be pursued. Unfortunately, the officials in Frankfurt reached that conclusion later than their US equivalents, which goes some way towards explaining the advanced nature of the US economic upturn compared to the European cycle.

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