World Follows Powell with Interest
If you have no idea what’s going on, copy the person next to you. It’s a case of monkey see,monkey do as central banks around the world prepare to mimic the widely expected interest rate cut by the Federal Reserve next week. Investors are in formation and ready!
When America sneezes, the rest of the world catches a cold. The world is watching US monetary policy as a long-awaited rate cut looms. If the US eases its money supply next week to make business cheaper and boost its markets, investor bases worldwide might start calling for the same. With trade headwinds affecting growth in every corner of the globe, the US markets lead from the front, with Fed Chair Jerome Powell in the spotlight!
Today, the European Central Bank (ECB) mulls over a rate decision. If it goes ahead with a cut, investors with exposure to the Eurozone will join the company of Australia, Brazil, Russia, and South Africa, and many others copycatting the US. Cuts around the world will be greeted differently, however. The Russians, with relative indifference, as their rates stay as high as 7.5%. The Ozzies, with relief, as they tip-toe around a rare recession. And the Europeans, with anxiety, as monetary jump leads keep failing to kick the continent into gear.
The Head of Global Economics at Meryll Lynch sees this “flurry of central banks cutting rates” as “somewhat unusual.” The only throwback to a similar time is “the financial crisis when all central banks put their oars in the water” at once, adds chief economist Diane Swonk.
Divided on trade. United on policy. If macro-economics are your thing, live this up! While cuts are fundamentally a good thing for us in the market, we still haven’t received the official confirmations. We may today, however, as the ECB meet for a think tank. Stay tuned!