Global Economics

Fed-ECB divergence has another year to run

Global Central Bank Watch
Written by Capital Economics Economist

Over the next twelve months we expect the gap in policy rates between the US and euro-zone to continue to widen. The Fed is likely to raise rates every three months while the ECB leaves rates unchanged until late next year. Further ahead, though, we think the Fed will be forced to loosen policy again as the US economy slows. In other major advanced economies, we think the Bank of England is still most likely to raise rates in August. But the BoJ will not change its policy settings for the foreseeable future.