BERLIN — In a rare move, the European Central Bank last week beat the US Fed eral Reserve to the monetary policy easing punch when it cut interest rates for the first time in nearly five years.AFP looks at why it was the first to act and whether the divergence holds any risks.Why did the ECB move ahead of the Fed ?The central bank for the 20 countries that use the euro cut its key deposit rate from a record 4 percent to 3.
'Analysts are now betting a cut once a quarter — so at every other meeting of the ECB, which makes its rate calls every six weeks — but also noted that the ECB could go slower, depending on the data.What consequences for the euro?If US interest rates remain higher, it will likely boost bond yields, particularly on 10-year Treasury bonds, and make the dollar more attractive to the detriment of other currencies.After the ECB's rate cut last Thursday, the euro fell to around $1.
Source: Loan Digest (loandigest.net)
Central Bank Sparks Concerns In Diverging From Fed
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