The prospect for lower interest rates in Europe is fading, but the reason has nothing to do with the European economy. The reason is found on the other side of the Atlantic Ocean.
Every time there is a disturbance in the market for U.S. debt, the American economy inches closer to a full-scale debt crisis. We just moved another inch or two.
Despite differences in inflation rates and macroeconomic trends, many central banks make their policy decisions based on what the Federal Reserve does.
European interest rates rise and fall closely with American rates. This can be good for Europe, but it can also be bad, especially if America is hit by a fiscal crisis.
After months of falling, U.S. interest rates are rising again. There is no apparent economic reason for this, which suggests that investors are worried about government solvency.
Donald Trump keeps criticizing the Federal Reserve for its interest rate policies. But if he gets what he really wants, he will make inflation great again.
The Federal Reserve is not eager to cut interest rates, but when they get around to it, they will have to pursue two policy goals at the same time—and one goal excludes the other.
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