Fed Chairman Jerome Powell and the poker game with stocks – How interest rate policy influences the markets and unsettles investors.

Fed Chairman Jerome Powell and the poker game with stocks – How interest rate policy influences the markets and unsettles investors.

According to a report by www.sueddeutsche.de, American Federal Reserve Chairman Jerome Powell raised the key interest rate by 0.25 percentage points, which led to a sharp rise in prices on the US stock exchanges and also in Europe. This move was part of a long-term strategy to combat inflation in the US and slow the economy. However, this tactic could also turn against Powell himself, as the current price trend could lead to further interest rate increases.

Investors had previously speculated that Powell was bluffing and believed that inflation would fall quickly, which could lead to interest rate cuts. As a result, prices on the stock exchanges rose sharply, and the S&P500 gained more than seven percent in January and the German DAX around ten percent. Technology stocks in the Nasdaq index gained around 14 percent, and Bitcoin rose by a good 40 percent.

The irony is that these price increases could force Jerome Powell to raise interest rates even further to combat inflation. This back and forth can lead to high volatility in markets as investors react to uncertain future prospects.

The current situation could lead to further turbulence on the stock markets as investors are uncertain about how exactly the Fed will shape interest rate policy in the future. This uncertainty could have a negative impact on the financial sector and lead to increased caution when investing. It remains to be seen how the situation will develop and what measures the Fed will take to control inflation.