Later today the US Federal Reserve will finish its two day meeting and make its monetary policy statement and interest rate decision announcement. No change is expected in interest rates, but the timing of coming rises in the core rate is of major concern to all markets, so the words used in the statement and the answers given by Ms. Yellen at the press conference will hold the focus.
It is known that the Fed is as concerned about the Greek situation as any European economist or politician, and it is felt now that it will hold off making any meaningful announcements until after this has come to a head, either with a last-minute agreement between Greece and the rest of the Eurogroup (which meets tomorrow) or in a Greek default.
Bracing for a Greek default
Does the EU in general have the ability to pull a Greek situation back from the brink? There must now be a realisation that even if a solution were to be found it could not be ratified by all member-state parliaments (and any meaningful concessions to Greece would require such agreement) in time to avert a default on the significant payments that are due by Greece at the end of this month, a mere two weeks away.
There have been sovereign defaults before, of course, notably the Russian default in 1998, which did have serious implications for the world economy and for the markets. However, that one came to a head quickly and the Ruble did not have the status that the Euro has, of being the world’s joint most important currency along with the US dollar.
We live in interesting times.