The Fed and ECB have diverged on interest rates and inflation forecasts.

From Yahoo Finance: 2025-06-14 11:00:00

The Federal Reserve is expected to hold interest rates steady for the fourth meeting in a row, while the European Central Bank has lowered its rates for the eighth time in a year. President Trump has criticized the Fed for not lowering rates, as the US and European economies move in different directions due to various factors. The ECB cut its benchmark interest rate to 2%, leaving borrowing costs over 2 percentage points lower in Europe than the US. The Fed last cut rates in December 2024, and the two central banks have diverged on inflation forecasts, impacting their policy decisions. ECB President Lagarde warned of trade tensions affecting demand and inflation in Europe, while the US faces tariffs on imports. The Fed is divided on whether to hold rates steady or cut later in the year, with some policymakers concerned about the lasting impact of tariffs on inflation. President Trump continues to push for lower rates to reduce US interest expenses, while the World Bank warns that global growth is expected to slow due to trade tensions and policy uncertainty. Mackenzie Investments’ chief strategist Dustin Reid predicts the ECB may need to lower rates due to challenging tariffs in the European Union. He also believes a Fed rate cut in September is possible, citing cracks in the US labor market. However, Reid does not anticipate a global recession. Powell may keep July open for a rate cut. Stay informed with in-depth analysis of stock market news and the latest financial updates from Yahoo Finance.



Read more at Yahoo Finance: Why the Fed and ECB are no longer on the same page