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So, here we are. After years of keeping interest rates high, the big dogs of finance and economics—central banks—are finally waking up. They’re all getting ready to lower those interest rates.  The era of high borrowing costs is coming to an end. Why? Because the global economy is starting to slide out of its post-Covid mess, and these banks are changing gears. Jerome Powell, the boss of the U.S. Federal Reserve, spilled the beans at this fancy meeting in Jackson Hole, Wyoming, saying: “The time has come for policy to adjust.” Over at the European Central Bank, the mood’s pretty much the same. Some big names from the ECB’s Governing Council showed up in Wyoming too. And guess what? They’re all singing the same tune.  Olli Rehn from Finland, Martins Kazaks from Latvia, Boris Vujcic from Croatia, and Mario Centeno from Portugal—all of them hinted that they’d support another rate cut next month. Remember, they already made a big cut back in June. Rehn said the disinflation process in the eurozone is “on track.” But he also pointed out that “the growth outlook in Europe, especially in manufacturing, is rather subdued.”  Still though, he thinks there’s a case for another cut in September. Centeno even called the decision to ease again in a few weeks “easy,” based on the current data on inflation and growth.  Simple, right? Eurozone policymakers are now more worried about growth than inflation. The labor market is looking soft, and they’re freaking out about that. Funny thing is, the ECB’s job isn’t even to worry about employment—that’s not in their playbook.  But when you see the economy wobbling, you can’t just ignore it. Some chatter among the ECB folks suggests they’re looking at two more rate cuts this year. That’s if inflation behaves itself and stays…

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Filed under: News - @ August 24, 2024 8:20 am