Blog

Interviews, event reports, comments

Industry insights into events and the latest topics in banking.

Blog

Interviews, event reports, comments

Industry insights into events and the latest topics in banking.

Killing banks softly – Deflation is coming!

One of my favorite charts is showing the decoupling of the long-term risk-free interest rate in the U.S. versus the one in Europe (Graph 1). Until about half a year ago, rates moved in lockstep โ€“ then suddenly, U.S. rates pushed higher, while German Bond yields remained low. What happened was that the US dodged the bullet of deflation after the Fedโ€™s massive quantitative easing program finally having gained traction. U.S. employment is picking up again and economic growth is moving higher. However, Europe, for the better part, remains plagued by mass-unemployment and low growth, with the economy on the brink of deflation.

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