Outlook 2022 (II): Interest Rate Turnaround in Slow Motion

They are indeed moving, albeit at glacial speed - the international interest rate levels. As inflation escalated and economies recovered the first central banks started raising interest rates this year. However, most guardians of their currencies remain cautious as there is a clear and present danger of stopping the recovery by acting too early. While the US Federal Reserve will end its bond purchases next year and raise its key interest rate, the European Central Bank will remain largely true to its line. Although significantly fewer bonds will be bought in the future, the ECB will not herald a turnaround in interest rates. This discrepancy in monetary policy is the most important factor influencing the EUR/USD exchange rate.