The European Central Bank is about to usher in its first rate cut. Divergence in the path of global interest rates is inevitable

As the global economic situation continues to change, the divergence between central banks in monetary policy is becoming increasingly obvious. Against this backdrop, the European Central Bank is about to take the important step of cutting interest rates for the first time. The decision is expected to have a profound impact on the path of global interest rates.

This year, the continued cooling of eurozone inflation has given the ECB room to cut interest rates. According to the latest data, inflation in the eurozone has fallen from its peak, which provides the basis for a change in European monetary policy. European Central Bank chief economist Philippe. Mr Lane said that, barring a major surprise, conditions were ripe to start cutting rates at the June 6 meeting.

At the same time, around the world, central banks' monetary policy paths are beginning to diverge. Central banks in Switzerland, Sweden, the Czech Republic and Hungary have already begun their rate-cutting cycles, while the U.S. Federal Reserve and the Bank of England are not expected to cut rates until the summer. The Bank of Japan, meanwhile, hinted that it has room to raise interest rates further.

The European Central Bank's decision to cut interest rates will have an important impact on global financial markets. On the one hand, a rate cut could boost economic activity in the eurozone, boosting investment and consumption; But a rate cut could also lead to a depreciation of the euro's exchange rate, which in turn would affect import prices and inflation.

On the other hand, once Europe begins to cut interest rates, it means that Europe is about to enter a period of monetary easing, the United States has completely failed to raise interest rates for two consecutive years, the exchange rate between Europe and the US dollar will begin to fully decouple, and it also means that a new round of global trade war will be fully launched.

Once a trade war starts, the dollar will most likely be affected. The White House spokesperson said in a speech on May 27 that "we will resolutely safeguard the dominant role of the dollar as the global transaction currency and will not allow any country to waver in this regard. The United States will not hesitate to take effective measures to sanction any behavior that challenges this bottom line, and ensure that the United States remains at the center of the international financial position."

In the past 100 years, no economy has dared to challenge the global dollar tide brought about by US interest rate hikes and interest rate cuts. And this time the European Central Bank cut interest rates, so that the dollar faced high interest rates, but also will create commodity-driven overall inflation. And now the dollar's pricing spear, only the only artificial intelligence, may be like the Internet bubble in 2000 for the final countdown.

With the beginning of a new cycle, when the currency war around the world is about to start, the United States is likely to follow up with interest rate cuts in Europe after there is no way to retreat, because maintaining a high interest rate of the dollar exchange rate alone is meaningless.

The ECB's first rate cut marks a new phase in global monetary policy. Under the dual impact of global economic recovery and inflation. Central banks need to weigh the pros and cons and formulate appropriate monetary policies.

In the process, the ECB's decisions will have a model effect on other central banks. If the rate cut policy is approved at this meeting, it will trigger further divergence in the path of global interest rates. In the future, global markets will also be closely watching the ECB's every move and how these actions affect the direction of the global economy.