As the US economy picks up pace its Federal Reserve is inching closer to raising interest rates, a move that will send ripples across the globe.

The US is shaking off the hangover from the financial crisis that hammered Europe and even knocked mighty China off its stride.

Ireland would welcome the move, experts said.

“This will help to weaken the euro and a weaker euro will help countries like Ireland, Portugal and Spain to sell more to the rest of the world,” said Philip Lane, an economist at Trinity College Dublin.

Choosing when to increase the cost of borrowing in the world’s biggest economy – a move expected next year – is a delicate balancing act.

Federal Reserve chairman Janet Yellen and others will be trying to work out how to keep the economic recovery on a steady keel without stopping it before the effects of the upswing lead to higher wages.

“It does seem like a done deal that it is going to increase interest rates,” said Paul Dales of economics consultancy Capital Economics.

“We are going into a new phase where the Fed is trying to bring things back to normal. It can send reverberations around the world economy.”

The European Central Bank, however, is moving in the opposite direction in a desperate bid to rekindle growth.

The ECB recently cut the cost of borrowing to near zero and pledged to buy repackaged debt in a bid to kick-start lending to small companies.

On the same day as central bankers gather in Washington, the EU will give further insight into why price inflation, an important yardstick of the recovery, plumbed new lows in August.

Irish Independent