American exceptionalism is the idea that the United States is different than the rest of the world. Believers point to economic freedoms and personal liberties contributing to the uniqueness and diversity of America’s economy, culture and politics. Regardless if you subscribe to the theory or not, America’s monetary policy may be an exception in an increasingly worried world.
Last week, the European Central Bank moved to buy billions of dollars of government bonds through the end of next year. The Bank of Canada unexpectedly cut its target interest rate. The Bank of Japan is dumping trillions of Yen into its economy. Even Denmark dropped its lending rate further into negative territory. All these actions have been taken in hopes of sparking activity in feeble economies and avoiding a deflationary spiral.
On Wednesday, America’s central bankers may be the exception. The Federal Reserve meets to consider its interest rate policy. For months, the speculation has been about when the agency will signal it’s preparing to consider the possibility of higher interest rates. (All those qualifiers are no mistake. The bank has no interest in surprising anyone with its policy.) After several years of zero percent borrowing rates, the bank refers to such a change as “liftoff.”
The Fed’s challenge this week is to reassure investors that America’s positive economic momentum remains an exception.
Financial journalist Tom Hudson hosts The Sunshine Economy on WLRN-FM in Miami. Follow him on Twitter @HudsonsView.