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One Country Is Not the Cycle

A U.S. policy rate is a domestic decision with foreign echoes. The echoes are not automatic.

By Nadine Okonkwo, Global Macro Correspondent

New York1 min read

The United States Capitol building with its white dome against a blue sky
The United States Capitol building with its white dome against a blue skyPhoto by Louis Velazquez on Unsplash

When the Federal Reserve moves, other central banks do not receive an order. Some will move later for their own inflation. Some will not move, because their labor market is different or their currency cannot bear it. The idea that 'the world follows' skips the part where each committee has its own statute.

What does travel quickly is the price of dollar funding and the conversation about it. A Treasury yield is a global instrument whether or not a foreign ministry comments.

The useful comparison is slow: two published policy rates and the gap between them. A gap, on its own, is not a regime.

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