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Morningstar: Could the ECB hold clues to a Fed rate rise?

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Investors are treading lightly in the markets ahead of the Federal Reserve’s two-day policy meeting this week. With the US economy showing signs of a recovery, analysts expect the Fed could announce plans for a rate hike on Wednesday.

Over the last year the Federal Reserve has struggled to raise interest rates as rates in Europe continued to fall according to Morningstar’s Director of Economic Analyst, Bob Johnson. At the moment, current policy setting strategies are being heavily influenced by the past decisions made during the 2008 economic recession. 

In 2008 the United States dropped rates and benefited from a relatively quick boost to the economy. Meanwhile European policy maker’s decision to keep interest rates high resulted in a slower economic recovery. After much delay European policy officials finally dropped rates between 2011-13 in order to pull themselves out of the recession. With more stimulus still required in Europe, the Federal Reserve’s possible decision to raise interest rates could prove difficult given the strong correlation between both markets.