Tuesday, March 8, 2011
EU signals interest rate shift
The European Central Bank is sending signals that its two year commitment to 1% interest rates is nearly over. Bank President Jean-Claude Trichet did not signal how much rates would rise, but the consequences for the Fed's policy of zero interest rates are clear -- the dollar will weaken, making imports more expensive and exposing the US to greater risk of inflation. Bernanke may be forced to move US rates up as well to prevent this from happening.