ECB interest rate hikes: How long will the level of 4.5 percent remain?

ECB interest rate hikes: How long will the level of 4.5 percent remain?

According to a report by www.finanzen.net, in July 2022 the European Central Bank raised the interest rate for the main refinancing business among banks to 0.5 percent for the first time since 2016. In previous years this interest rate was 0 percent. Since the first interest rate increase in 2022, the central bank has further increased this rate nine times and is currently at 4.5 percent in September 2023.

The European Central Bank is raising interest rates to get rising inflation under control. This leads to a weakening of the national economy, which is particularly visible in the German recession. The central bank hopes to curb inflation by raising interest rates.

The question now is how long interest rates will remain at this level. According to historical data, the average length of time that interest rates remain at this level after reaching their peak is about nine months. Even if things happen faster than average, interest rates are not expected to fall until the end of the first quarter of 2024 at the earliest.

There is also the possibility that interest rates in Europe will continue to rise, depending on the situation in the Middle East. The increased oil price increases production costs and further drives inflation. However, regardless of the political situation in the Middle East, interest rates in Europe should have reached their highest level.

The situation is similar in the USA. The US Federal Reserve began raising interest rates before the ECB, but the US economy is not in a recession and the effects of the interest rate increases will take longer to materialize. The interest rate turnaround in Europe is therefore likely to take place earlier than in the USA.

The capital market expects interest rates to fall significantly in one year and in the coming years. The yield curve is inverted, meaning that interest rates are higher on short terms than on long ones.

This current situation gives rise to concrete approaches for investors seeking returns. There are good opportunities for investing in fixed-interest securities, as the increased interest rate level can be used to buy high-quality bonds with different maturities. If inflation falls, real returns are possible again.

Stock investors should note that rising interest rates can have a negative effect depending on the debt level of the stock corporation. However, falling interest rates will improve the outlook. Currently, around 50 percent of the funds should be invested in stocks, while the rest is held as interest-bearing liquidity. As soon as there are signs of a sustained decline in interest rates, investors should take the opportunity to invest in stocks.

Overall, it can be assumed that interest rates will fall again in the foreseeable future, which will have an impact on the market, consumers and the industry. Investors looking for returns can benefit from the current situation, but patience and close observation of the market are required.

Source:
According to a report from www.finanzen.net