ZEW - Centre for European Economic Research

06/12/2024 | Press release | Distributed by Public on 06/12/2024 06:15

ZEW Economist Friedrich Heinemann on Fed’s Interest Rate Decision // “The USA and Eurozone Are Drifting Further Apart in Terms of Monetary Policy” (June 2024)

"The USA and Eurozone Are Drifting Further Apart in Terms of Monetary Policy" (June 2024)

Professor Friedrich Heinemann, head of the ZEW Research Department "Corporate Taxation and Public Finance" at ZEW, comments on the Fed's interest rate decision and the US economy.

Tonight the Fed will make a decision on key interest rates. It is expected that the rates will remain unchanged. Friedrich Heinemann, head of ZEW Mannheim's "Corporate Taxation and Public Finance" Research Unit and professor at Heidelberg University, has commented on the upcoming decision:

"The once again surprisingly strong US labour market data for May has taken the wind out of the sails of proponents of a rapid interest rate turnaround. The path back to price stability is difficult for an economy as dynamic as that of the US. In addition, the continued restrictive monetary policy is being offset by a continually expansive fiscal policy. Despite the upswing, the current budget deficit still stands at a staggering six per cent. The US will therefore continue to get along well with the high interest rates and may even need them to prevent the economy from overheating. The eurozone and the US are thus drifting further apart in terms of monetary policy, which is not particularly surprising. The right kind of monetary policy for a highly regulated, anaemic economy in an ageing Europe looks different from that of the United States, which is more focused on growth and less on redistribution."