ANALYSIS: If Trump implements his stated policies, there may be a greater and greater divergence between US and European monetary policy

Markets expect Federal Reserve monetary policy to be significantly different from the European Central Bank next year, as higher growth and inflation expectations in the US will lead to increased divergence between the two economies. Market pricing suggests that by the end of next year, the Fed's rate cuts will be only half that of the ECB, which is facing weak economic growth and inflation below target. Jennifer McKeown, chief global economist at Capitol Macro (Capital Economics), said, ‘We expect the Fed to take a fairly cautious approach due to rising inflation risks, while the ECB will react strongly to economic weakness, which will lead to an easing cycle for both of divergence.’