Despite the Federal Reserve's tapering, U.S. interest rates have followed the downward trajectory of eurozone rates in 2014, says Morningstar's Bob Johnson.
Bob Johnson: This week's series of charts focuses on interest rates in Europe compared with the United States. And it's a very interesting topic because, if you look at the charts, you can see that the U.S. when we entered the recession quickly reacted and dropped interest rates and saw a quick pop in its economy.
Meanwhile, Europe tended to hold their rates higher during the recession, and they saw a very lackluster recovery. And in fact in 2011-13, they finally succumbed to really reduced rates, and that did pull them out of the recession. And so, that's the good news out of these charts.
What's happening right now is that the Europeans need to further stimulate their economy because they're still behind the eight ball and their economy isn't growing fast enough. To do that, they brought rates down dramatically. And what's interesting here is that the U.S. had started to move their rates up, as you can see in the chart over the last year and as we talked about the Federal Reserve tapering and potentially raising the rates in 2015.
Meanwhile, the Europeans are going the other direction and saying that they need to loosen more to stimulate their economy. That has now fallen, and it has actually begun to suck the U.S. rate down as well. And that's been the big surprise of 2014--that U.S. rates have actually dropped even in the midst of the Fed trying to tighten.
