Central banks on both sides of the Atlantic are grappling with inflation, with the US expected to reduce interest rates in September, three months after Europe. Inflation has slowed in the US but remains higher than in Europe, with key indicators like the Personal Consumption Expenditure Index (PCE) and Consumer Price Index (CPI) showing upward trends. However, the Federal Reserve (Fed) is likely to keep interest rates unchanged due to a stronger economy and better prospects for consumers.
Meanwhile, the European Central Bank (ECB) is considering lowering interest rates in June, three months earlier than the Fed, as annual consumer price inflation in the eurozone has been slowing steadily. The ECB is weighing the possibility of increasing interest rates depending on the inflation trajectory but has not yet made a decision. Despite higher inflation in the US compared to Europe, core inflation rates are found to be similar when adjusting for housing costs.
The decision to cut interest rates at different times by the Fed and ECB is influenced by their respective economic growth outlooks. The US economy is forecasted to grow faster than the eurozone due to strong consumer demand and job growth. This makes it less likely for the Fed to cut interest rates immediately as it wants to maintain low unemployment levels and promote economic growth. In Europe, however, weaker economic conditions and lingering effects of energy crises contribute to a greater likelihood of interest rate cuts by policymakers.
Households in America appear more willing to spend compared to European households due to better prospects in the labor market. This leads to higher consumer demand and a stronger economy that makes it harder for central banks like
