Alain Closier
Sep 25, 2024
Q: What are your thoughts on interest rates in Europe and the US?
Monthly Commentary
Q&A with Alain Closier
Alain Closier,
Senior Advisor
Paris, France, Europe
Question:
What are your thoughts on interest rates in Europe and the US?
Answer:
A famous French humorist once said, "Forecasts are difficult, especially when they concern the future." After 35 years of analyzing financial indicators, I agree: predicting interest rates is nearly impossible. Investors and borrowers must seize rare opportunities when they arise.
Currently, we might be in one of those moments. Let’s focus on 10-year government bond rates in the US and Europe, specifically the spread between German and French rates.
In the US, rates have fluctuated, rising and falling repeatedly. Despite significant inflation reduction and a slowing economy, the Fed hinted at easing monetary policy, suggesting a potential rate cut.
In Europe, the situation is more nuanced. German rates are returning to last year's levels, and while inflation has improved, economic growth remains uncertain. Even after its first rate cut in five years, the ECB remains cautious. The spread between French and German bonds widened slightly due to political uncertainty in France, yet investors seem hopeful for a favorable resolution.
In summary:
1. Rates in both the US and Europe are likely to trend downward.
2. The US has more room for rate cuts, potentially 100 to 150 basis points, as the Fed is expected to be more accommodative.
3. Europe has a smaller margin for cuts, around 50 to 100 basis points.
4. The French-German spread's future depends on France's political and economic decisions. Failure to address French debt could widen the spread, counteracting any rate cuts.
These anticipated rate decreases reflect delayed reactions to recent unpredictable shocks (COVID, war in Ukraine). Future shocks could affect this trend, keeping rates volatile.
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Alain Closier, Senior Advisor
Paris, France, Europe
Alain Closier is a former member of the General Management Committee of the Société Générale group. With more than 35 years of experience in international banking and finance, he is, and has always been, passionate about creating innovative activities.
Alain Closier is a graduate of the National School of Statistics and Economic Administration (ENSAE) and holds a post-graduate degree in Economics from Panthéon-Sorbonne University, in Paris. He began his career as an economist, before joining the International Treasury department of Société Générale.
In the 90s, Alain was responsible for the international development of FIMAT. Originally only a French brokerage company, FIMAT has become in just a few years an international leader specializing in brokerage on derivative stock markets with a presence in more than 25 countries.
Alain Closier was also the creator of FIMATEX, a precursor of online brokers. In 2000, FIMATEX was one of the largest IPOs in Paris in the internet sector. After several mergers and acquisitions, FIMATEX became Boursorama, today one of the French leaders in online banking.
Alain Closier's work has been rewarded on several occasions by international financial institutions. As Director of Société Générale Securities Services (SGSS), he was elected “European Personality of the Year in Asset Servicing” in 2010 by Funds Europe magazine. Its teams were recognized both for their expertise in emerging markets and for their presence on a European scale.
Overseeing the development of the bank's venture capital activities in Silicon Valley during the 2000s, Alain Closier acquired in-depth knowledge of the problems encountered by start-ups, both in the United States and in Europe.
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