The US Federal Reserve (Fed) and European Central Bank (ECB) are in different positions, where the Fed has eased back on its stimulus while the ECB has kept its purchase programmes going.
In my view, the Fed looks open for the longer end of the interest rate curve to go higher and steeper and therefore I do not believe they will raise short-term rates any time soon.
It’s trickier for me to predict how the ECB will act at their upcoming meeting given their ongoing use of the Pandemic Emergency Purchase Programme, which could indicate they are happy with the current level of interest rates.
I am more concerned about interest rate volatility. In my view, central banks are also more concerned about the extent of the moves of interest rates, rather than the level. I will be looking to see how the ECB and Fed communicate their monetary policies in the coming weeks.
