Fed March Rate Hike Will Distance it Further From ECB

March 3, 2017 Share Print 0

Two of the world’s biggest central banks are likely to find themselves with a bigger policy gap by the end of the coming fortnight

The European Central Bank on Thursday will resist calls to start tightening policy against surging inflation but robust U.S. jobs data on Friday could seal the case for another Federal Reserve hike the week after.

So, let’s say minus 0.4 percent rates in Europe and more than 0.75 percent in Washington.

With just weeks to go before contentious French and Dutch elections, the ECB will be keen not to rock the boat, so it is likely to give just a token nod to robust growth figures, steering clear of any policy hint that may give emerging populist movements ammunition.

A Reuters poll showed unanimity for no change.

But the balancing act may be more difficult than it looks.

With growth on its best run since before the financial crisis and inflation peeking just above the ECB’s target, calls are mounting, particularly in Germany, for the bank to scale back its 2.3 trillion euro ($2.42 trillion) bond buying scheme and raise its negative interest rates.

via Reuters

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Alfonso Esparza

Senior Currency Analyst at Market Pulse

Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.