CASE Policy Briefs, global currency, global economy, Global/Multiregional, Macroeconomics and macroeconomic policy, monetary policy, Trade, economic integration and globalization, US

The Global Repercussions of changes in US Monetary Policy

The ongoing interest rate cuts in the US are risky for both the US and the global economy. The international dimension of the decisions taken by the Federal Reserve Board is being underestimated by most market analysts and commentators, whose focus seems to be largely how the rate cuts affect individual countries. Attempts to analyze the potential transmission effects of the US subprime mortgage crisis on other economies concentrate on the demand channel (how the expected US slowdown will influence growth in other countries/regions) and the fi nancial sector contagion (losses in some large banks, the spread of negative market sentiment as observed this past summer). Monetary policy and inflation developments have attracted much less attention.