There will be a steep hike in both the blocks.
Central bank interest rates are rising again in both the US and Europe. It is considered necessary to control high inflation. Prices in Europe will rise by half a percent. In the US, interest rate hikes will only be a quarter of a percentage point.
De Nederlandsche Bank (DNB) President Klaus Knott has already said that interest rates will rise again next month. According to policymakers, the increase is necessary as inflation continues to rise rapidly. “However, let’s assume we add half a percentage point to interest rates twice in February and March.”
Interest rates rose at a slower pace in the US. The Federal Reserve (FED) raised US interest rates by 0.25 percent as expected. This increase is less robust than in recent times. At the end of last year, interest rates rose by half a percentage point, compared to 0.75 percent the previous four times. According to the US Federal Reserve, things are slowing down now that inflation is easing somewhat.
But inflation is still high, so interest rates will have to rise for a while. It is not yet clear how many more hikes are to come. However, the Fed’s central bankers are talking about a series of hikes. They will continue until interest rates drive the economy down enough to move inflation toward the 2 percent target.
Federal Reserve Chairman Jerome Powell said in a statement that interest rates will need to rein in the economy for a while to reduce inflation. So, if the economy does what he and his fellow policymakers now expect, he won’t see an interest rate cut this year.
The US economy is already cooling somewhat, but the labor market is still tight. For example, despite necessary layoffs at U.S. firms, Wednesday’s figures still showed a higher-than-expected number of vacancies.
Interest rates in the US now range from 4.5 percent to 4.75 percent. Financial markets are now assuming a maximum interest rate of five percent. That’s roughly in line with expectations the central bank expressed in December, when policymakers said interest rates would rise 5 percent or more this year.
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