U.S. and Europe Brace for Divergent Economic Paths

The United States and Europe are set to diverge significantly in their monetary policies next year. The Federal Reserve plans to reduce interest rates less aggressively than the European Central Bank (ECB) due to higher growth and inflation projections in the U.S. Meanwhile, the ECB is expected to respond more forcefully to Europe’s sluggish growth and low inflation. Donald Trump’s proposed tax cuts and tariffs are anticipated to keep U.S. inflation above 2%, while Eurozone inflation may fall below the ECB’s target. This divergence highlights concerns about the Eurozone’s economic vulnerability, especially in light of potential trade tensions with the U.S.