European Central Bank Warns of US Fed Cuts

  • 17 years ago
  • Uncategorized
16/01/2008 London-With the United States Federal Reserve bank set for further and faster rate cuts than previously expected, the ramifications of such a move were being felt across the world. The dollar fell again against world currencies after comments from Fed Chairman Ben Bernanke in early January. Gold surged to an all time high of $914 an ounce in New York and futures contracts were starting to price in the likelihood of a rate decrease.
An important member of Europe’s Central Bank warned that the tumbling dollar may reduce options for the US farther down the line. Lorenzo Bini-Smaghi, a member of the European Central Bank’s executive council, told an Italian newspaper, La Republica, that “I would not be so sure about the movements of the Fed. There is a serious problem with the dollar in America. We will see what margins they have for further rate cuts.”
The Euro reached $1.49 on Monday, January 14, just off its all time high, while the pound was at just over $1.95. Both currencies, after reaching highs late in the 2007 against the dollar, were showing signs of coming down. The latest news from the US Fed could change that, however. If interest rates in the US are cut quickly, then the Euro and Pound could see another jump in value.
When the pound and Euro are strong against the dollar, American products are less expensive for Brits and Europeans. This is true for real estate as well as any other product sold in US dollars. The European money goes much further when buying large dollar items, and there are plenty of properties for sale in the US right now.

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