Decoding the decoupling in US and eurozone inflation

ECB rates cut and Fed’s refusal to follow suit point to differing fundamentals in stateside and EU economies

When the European Central Bank (ECB) decided to cut interest rates on June 6, the decision was hardly unexpected. The data on implied interest rate futures over the previous weeks had shown a rates cut to be a virtual certainty.

Nevertheless, the decision by Austria to vote against the cut highlights an issue the ECB will have to address sooner or later: the wide divergence in inflation levels across eurozone member states at a time when the central bank is targeting a 2% weighted average level

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