The European interest rate is now at record low of -0.5% and US President Donald Trump would like to see similar cuts from the Federal Reserve.
The Europeans have cut interest rates into the negatives ahead of a fresh round of stimulus scheduled for November. The news was welcomed by many in Europe, but it also received praise from the US. Upon hearing the news, Trump took to Twitter to take more jabs at the Fed over their reluctance to further lower interest rates. In his tweet, the president suggested that the US should follow Europe’s example and also cut rates to below zero.
The ECB has had negative interest rates since 2016. According to Markets Insider, most economists don’t believe the US would be able to achieve a rate even close to that. The reasons the ECB has carried such low interest rates are unique to the European economy. “The Governing Council now expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon,” the ECB explained in a statement.
The question right now is what negative interest rates have done to Europe. Before the 2016 change in ECB leadership, the European economy was struggling, leading to interest rates being lowered even into the negatives in 2016. Since that time, the European economy recovered a little bit. The Euro stabilized and inflation rates have been moving closer to the ECB target of 2%. However, lowering interest rates into the negatives wasn’t a perfect solution. Commercial banks are the ones who feel the pain when interest rates are negative, but they’re also the primary lenders when it comes to mortgages and small business financing, making them vital to the EU economy.