Constantin Gurdgiev: Long-term Fed path may force ECB to act

Positives for Ireland, but 'normalisation' in US may lead to higher euro zone rates

15th December, 2016
US Federal Reserve Board Chair Janet Yellen holds a news conference after the central bank announced an increase in the benchmark interest rate. Pic: Getty

The key to understanding the real economic effects of the Fed announcement is in what it says about forward policy signalling. The FOMC position has shifted this week toward an expectation of three hikes in 2017, up 75 basis points for the full year, against September 2016 expectations of two such hikes and 50 basis points.

Meanwhile, prior to the Fed announcement, market consensus expected the Fed to be moving towards a 1.5 per cent rate target by 2019,...

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