Inflation Gap Widens Between Us and Europe
U.S. inflation is expected to outpace the euro zone due to higher growth, tariffs, and cheaper European energy after a potential Ukraine peace deal, but the gap in bond yields remains narrow despite traders' bets on divergence. The U.S. economy has expanded 12% since the pandemic, while the euro zone has grown 5%, driven by differing growth paths and tariff threats. Investors are now eyeing other factors, including recent tepid U.S. economic data and expectations of European defence spending.
- The widening inflation gap highlights the growing divergence between the world's two largest economies, with far-reaching implications for global trade, investment, and economic stability.
- What will be the long-term consequences of a US-Europe growth divergence on the trajectory of their respective monetary policies, including interest rates and quantitative easing?