Here’s How the Fed’s Decision Impacts the Eurozone
The U.S. Federal Reserve’s decision not to scale back quantitative easing may help interest rates in Europe stay low, Reuters reports.
In an unexpected move, the Federal Open Market Committee decided against tapering quantitative easing during its September meeting, meaning it will go ahead with the full $85 billion per month program into the near future. Federal Reserve Chairman Ben Bernanke cited a lack of improvement in data from key sectors as the cause for the decision.
This certainly comes as good news for emerging countries, which have seen their economies boosted by the inflow of cheap dollars that quantitative easing provides. Concerns over the tapering of quantitative easing had sent investors rushing out of emerging markets in droves, causing currency values to decline and bond yields to rise.
Wednesday’s news from the FOMC should help stop the bleeding, at least on a temporary basis, until more preparation for the end of the policy can be implemented. However, the continuation of quantitative easing has positive spillover for the eurozone, as well.