Europe's Rate Rise Signals End of Cheap-Money Era

Wall Street Journal
April 8, 2011

The European Central Bank on Thursday became the first monetary authority in a major developed economy to raise interest rates since the global financial crisis struck—a sign that the long period of extraordinarily easy credit is beginning to come to a close.

In the U.S., where there is less inflation angst than in Europe, the Federal Reserve is unlikely to follow until very late this year or early next. Moving ahead of the Fed is unusual for Europe's central bank. The Fed moved first in the previous two global monetary-tightening cycles since the ECB was formed 12 years ago—in the late 1990s, and in the mid-2000s.

Central banks in Canada and Australia, which boosted rates last year, and in the U.K. are expected to raise rates this spring or summer. The Bank of Japan, preoccupied by the devastation of the recent earthquake and a continuing nuclear crisis, is not.

More