Nov 12 (Reuters) – With the European Central Bank and U.S.
Federal Reserve pulling the same way, global interest rates will
be lower for longer, feeding an ongoing rally in risky assets.
But since monetary policy has a bigger impact on financial
markets than the real economy – arguably, anyway – the bigger
the paper gains get, the more acute the risks become.
The ECB surprised virtually everyone last week when it cut
its key lending rate to 0.25 percent, reacting to an
uncomfortable slide in inflation and an equally vexing rise in
the value of the euro.
Following on the Fed’s decision not to slow bond purchases
in September, this marks the second time in less than two months
that a major central bank has shocked investors with dovish
And to judge from the noises coming out of the Fed, we are
running out of excuses for being surprised.