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The era of global central banks moving in lockstep with the Federal Reserve is over. For decades, the Fed dictated the world’s monetary policy. Its interest rate changes affected currencies, stock indices, and economies worldwide. If the Fed raised rates, everyone else had to follow, or their currencies would take a beating. But in today’s fragmented global economy, things are different. Countries have their own battles, and many central banks are now making moves based on their local needs, not what happens in Washington. Central banks taking their own path In the 1990s and 2000s, it was all about the Fed. US economic power was at its peak, and most central banks danced to its tune.  Wall Street’s stock markets set the rhythm, and if you didn’t keep up, your currency could collapse. US allies enjoyed the benefits of access to American markets and investments.  Meanwhile, adversaries like the Soviet Union, which crumbled under sanctions, saw their economies wither. China, still a friend back then, experienced massive growth. But that’s all in the past. Fast forward to today, and the world is a very different place. Every major economy is facing unique challenges. In the US, inflation has been the big problem for two years. Europe, dealing with the fallout from Russia’s war in Ukraine, is struggling with inflation too, made worse by the loss of cheap Russian gas. Japan, though, is happy to see inflation after decades of economic stagnation. And China? It’s dealing with deflation and a collapsing property market. So as the Fed struggles to contain inflation, other central banks are doing their own thing. The European Central Bank and the Bank of England acted earlier and started cutting rates before the Fed even made its first move. And Japan’s yen has been on a rollercoaster. It…

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Filed under: News - @ October 16, 2024 12:28 pm