The ECB and the Fed: Divergent Paths to Doom?

Americans tend to focus on the Federal Reserve, but often forget the US central bank isn’t the only game in town.
While Yellen and company hint they will try to continue pushing interest rates up, European Central Bank president Mario Draghi told European Parliament’s Economic and Monetary Affairs committee he intends to push ahead with his interventionist monetary policy. That means continued negative interest rates and quantitative easing for the EU.
So, are the world’s two largest central banks taking divergent paths to doom?
During Monday’s meeting, Draghi stressed the European bloc still needs ‘an extraordinary amount of monetary support’ in spite of its growing economic recovery. The ECB president said he’s’firmly convinced’ the bank should continue ‘support measures,’ including 60 billion of monthly bond purchases.
Overall, we remain firmly convinced that an extraordinary amount of monetary policy support, including through our forward guidance, is still necessary for the present level of underutilized resources to be re-absorbed and for inflation to return to and durably stabilize around levels close to 2pc within a meaningful medium-term horizon.’

This post was published at Schiffgold on MAY 30, 2017.