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US and Europe diverge on monetary policy as Trump scrambles outlook

Big central banks’ rates trajectories part ways as Eurozone wrestles with sluggish growth

US monetary policy is on course to sharply diverge from Europe next year, with higher growth and inflation projections opening a transatlantic divide with the sluggish Eurozone. 

The Federal Reserve is set to cut its benchmark interest rate only half as much by the end of next year as the European Central Bank, which is facing sagging growth and inflation that undershoots its target, according to market pricing. 

With Donald Trump preparing to cut taxes and increase tariffs, US inflation is forecast to stay above 2 per cent throughout the whole of 2025, according to predictions compiled by Consensus Economics. Eurozone inflation is on the other hand forecast to drop below the ECB’s target of 2 per cent as soon as February.

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