Market Overview

Diverging Global Interest Rates: Here's Why The Market Shouldn't Be Worried

Diverging Global Interest Rates: Here's Why The Market Shouldn't Be Worried

RSM Chief Economist Joe Brusuelas said the United States is poised to outperform the Eurozone not only in growth, but also in hiring and diverging inflation readings, as the U.S. economy is rebounding and the inventory correction that caused much of the quarter to quarter volatility in 2015 GDP coming to an end.

"In our estimation fears of an imminent U.S. recession were always overblown and recent fundamental economic data supports this supposition. We think that the combination of economic outperformance and rate divergences, especially within the context of negative interest rate policy in the Eurozone augers for a stronger dollar and capital flows moving into the U.S. to seek greater yield," Brusuelas told Benzinga in an email.

See Also: ECB Continues Down Rate Reduction Road

Brusuelas expects at least one and possible two additional 25bps rate hikes in the U.S. this year. That being said, global asset volatility may continue due to problems in the EU banking system, the economic and financial challenges in China and the June 23 referendum on a possible Brexit in the UK from the EU.

Earlier in the day, the ECB trimmed the interest rate on the main refinancing operations of the eurosystem by 5 basis points down to 0.00 percent. The interest rate on the marginal lending facility has been cut by 5 basis points to 0.25 percent.

In addition, the interest rate on the deposit facility will be decreased by 10 basis points to -0.40 percent. All changes are effective from March 16, 2016. The ECB also boosted the monthly purchases under the asset purchase program to €80 billion starting in April.

Posted-In: News Eurozone Global Econ #s Economics Federal Reserve Exclusives Markets Best of Benzinga


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