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.
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