Not Where You Think
Interest rate hikes have been all the rage lately in the United States. The US central bank has been raising rates at historic levels to combat inflation in what has been one of the worst flare-ups since the 1980s. America isn’t the only place in the world facing inflation, and another historic rate hike occurred on the other side of the Atlantic.
The European Central Bank, which controls monetary policy for the European Union, raised rates for the first time since 2011 in what the first governmental step after a couple of chaotic weeks has been. After 8 years of negative interest rates, the half-percentage point raise brings their interest rate to 0 percent to combat skyrocketing inflation that has been shown in many ways. Recently, the dollar to euro exchange rate fell 1:1 for the first time in 20 years, and inflation in the bloc sits around 9 percent annually. It was initially expected to rise by only a quarter of a percentage point, but they decided to strike higher due to problems the European economy is experiencing at the moment. Italy is currently on the verge of governmental collapse with the resignation of Prime Minister Mario Draghi, which has put the economy in question. Consumer confidence is decreasing, and costs are rising along with that. Economists believe that even though this is the right decision, this could be a case of “too little, too late” as steeper hikes might be necessary to bring inflation down to the 2 percent level. The last issue plaguing the EU economy has been the standoff with Russia over gas from the Nord Stream Pipeline, which has sent energy prices soaring.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.