Inflation expectations in the US have risen significantly in recent weeks – and so have interest rates. For example, ten-year US government bonds returned 1.6%, the highest they have been for over a year. The interest rate was even above the average dividend yield of the S&P 500 Index (1.5%). This means that government bonds are increasingly becoming an alternative to stocks again in the USA. This is not “good news” for the slowly recovering economy, because it means tightening financing conditions on the capital market.
Although bond yields in Europe have risen less strongly, the European Central Bank announced a week earlier that it would accelerate the bond purchase program and counter recent market developments. Probably the most central question for the US monetary authorities was whether and how they would deal with the unrest in the bond sector. The Fed’s answer was unspectacular: everything remains as it was. The central bankers around Jerome Powell expect a faster recovery, but this is not yet a reason for a more restrictive monetary policy for them. The Fed is also not worried about inflation at the moment.
The topic of conversation this week was the renewed flare-up of the Brexit issue. Last Monday, the EU launched proceedings against the UK for violating the Withdrawal Treaty. The stumbling block is a special regulation concerning Northern Ireland. Brussels accuses London of arbitrarily changing agreements and thus violating the Brexit agreement negotiated in 2019.
The Northern Ireland Protocol contained therein provides that the rules of the EU internal market should also apply to this province in the future. This is intended to make controls at the internal border with the EU state Ireland superfluous, but requires such controls for goods traffic with Great Britain.
Originally, these should start at the end of March after a transition phase. However, London refuses to install import controls as it fears that Northern Ireland will be cut off from the rest of the kingdom.
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