American and European monetary policies are expected to seesaw this month, with the European Central Bank on Thursday announcing a further interest rate cut just as the U.S. is preparing to lift its own rates for the first time in nearly a decade.

As it seeks to accomplish its dual mandate, the Federal Reserve doesn't explicitly care about foreign monetary policies, so the ECB's shift is unlikely to do much to rock the interest rate boat in the U.S.

Still, it's hard to ignore such divergent monetary policies in two of the world's largest, most closely linked economies.

"Our recovery started earlier in the United States, and it has been more robust. And our Fed was much more aggressive much earlier than the ECB," says Steve Chiavarone, an associate portfolio manager at Federated Investors.

In an attempt to finally buck a regional trend of persistently meager economic growth, the ECB is extending its substantial bond-buying initiative and further reducing the eurozone's already negative interest rates. The ECB slashed rates an additional 10 basis points to minus 0.3 percent Thursday.

European rates have been held in negative territory since mid-2014. The benchmark rate in the U.S., on the other hand, has been held at near-zero since 2008, but has yet to dip below zero.

Under normal interest rate circumstances, a central bank like the ECB would pay modest interest to commercial banks that use the ECB to maintain their respective reserves, in the same way that commercial banks pay interest to consumers who store money with their institutions.

When interest rates are negative, though, the ECB actually charges commercial banks rather than paying them interest. In theory, some commercial banks would then begin loaning money out to consumers or private firms more readily to avoid the new charges associated with storing cash in the ECB's system.

The policy is also designed to lower the value of the euro, making European exports more competitive internationally. In practice, however, it hasn't yet had much success in jump-starting European growth.

"Today, the ECB clearly disappointed the markets with their measures, particularly with not expanding the pace of [bond] purchases. You've got the dollar down today, the euro's up, and you have some pressure on markets because of that," Chiavarone says.

Investors generally expected a more substantial increase to the central bank's current $65.4 billion-per-month bond-buying program. The duration of this policy was extended to at least March 2017, but the monthly cap was not increased, and investors weren't happy about it. The Dow Jones industrial average plunged more than 120 points shortly after opening, and European markets also dropped sharply in response.

"This is not an insignificant stimulative package from the ECB – but it is right at the lower end of market expectations," Howard Archer, a chief European and U.K. economist with research and analysis firm IHS, wrote in a research note Thursday. "With the ECB having flagged at its October meeting that more stimulus was likely in December that could involve a cocktail of measures, the markets – at least initially – have been underwhelmed and unimpressed by what has been served up."

International monetary policies have generally moved in the same direction throughout the global economic recovery, so this month could bring about a rare period of divergence should Fed officials decide to lift America's rates at the Federal Open Market Committee's next meeting.

America's economic growth has consistently outpaced the euro area's over the last few years. Andrew Soergel for USN&WR; Source: Bureau of Economic Analysis, OECD

America's gross domestic product was hit harder by the global financial crisis than the 19-country euro currency bloc, but quarterly economic growth in the U.S. has been head and shoulders above its European counterparts throughout the recovery.

And although a nation's economic growth is driven by plenty of factors, the myriad young employees in the U.S. workforce may have helped drive domestic performance at a faster rate than Europe could match.

"[America has] much better demographics. People forget that – for all the challenges that millennials bring – demographically, they're a blessing," Chiavarone says. "Because they're as large as, if not larger than, the baby boomers. And the rest of the world doesn't really have a generation that's as large as their baby boom generation."

The Census Bureau estimates there are more than 83 million millennials living in the U.S., representing about a quarter of the country's total population. And the Pew Research Center earlier this year said millennials have overtaken both baby boomers and Generation Xers as the largest generation of employees in the U.S. labor market.



Europe, on the other hand, has been dealing with an aging workforce and declining fertility rates. And since the ECB can't do very much to fix the area's alarming demographic shifts, it's being forced to extend its accommodative policies deeper and longer than the U.S. has.

But, to be fair, America's monetary policy is still going to be considered accommodative for quite some time, even after interest rates lift off.