European Central Bank lowers inflation forecasts - impact on financial markets and investors

European Central Bank lowers inflation forecasts - impact on financial markets and investors

According to a report by www.faz.net,
The European Central Bank (ECB) has significantly lowered its inflation forecast and expects an inflation rate of less than 3 percent for the coming year. The ECB is leaving its interest rates unchanged, similar to the American Federal Reserve, the Bank of England and the Swiss National Bank.

In the press conference after the interest rate decision, ECB President Christine Lagarde emphasized that the ECB Governing Council had not even discussed interest rate cuts. The ECB now expects inflation to gradually decline and approach the Governing Council's 2 percent target in 2025.

The ECB's decision had a slight impact on the stock and bond markets. The DAX fell slightly after the ECB's interest rate decision, and the yields on ten-year American government bonds fell after the Fed's decision. Fed Chairman Powell's statements were interpreted in the market as signals for a loose monetary policy, while ECB President Lagarde was perceived more as a rejection of such a policy.

Overall, the ECB's attempt to drive out speculation on interest rate cuts in the financial markets does not seem to have worked properly. The interest rate expectations reflected in the financial markets fell only very slightly. Commerzbank has even revised its interest rate forecasts in favor of previous interest rate cuts.

It is expected that the ECB's decision and its statements will create a certain degree of uncertainty in the market. Lagarde's extremely cautious interest rate expectations could lead to disappointments in the long term. Investors should therefore take advantage of the possibility of a correction and enter the market as soon as one occurs.

The ECB has also announced changes to its Corona crisis program and wants to gradually reduce its purchase volume of bonds in the new year. The exact impact of this measure is currently unclear, but it could cause bond markets to move and yields to change in the coming months.

In summary, the ECB's decision is of great importance for the financial markets. It shows that the central bank is pursuing a more cautious monetary policy and is not considering rapid interest rate cuts. Investors must prepare for possible uncertainties and market reactions and adapt their investment strategies accordingly.