Preview
Europe made their second interest rate hike in the last 2 months. Judging by their decision, it’s fair to say that it’ll be a preview of the US’s decision on interest rates in a few weeks.
The European Central Bank hiked interest rates by 0.75%, bringing it up from the 0 level. Their past hike was 0.5%, and they also signaled that further rate increases are going to be a thing given the economic situation of the bloc. The European economy is in shambles compared to the US, and they are legitimately teetering towards a recession. Energy is the most talked about when it comes to Europe due to tensions with Russia, but ECB chair Christine Lagarde said that inflation is starting to spread to other sectors.
A main difference is that the ECB can’t afford to perform these large rate hikes consecutively due to the fragility of some member states and these are problems that have existed for the whole year. Europe has identified that their inflation problem is different from the US for multiple reasons, including the fact that the US job market is red hot, and the economy has become too hot. Europe’s problems revolve more around the supply chain and energy, putting the ECB in a slight problem when it comes to the control they have. Other countries have jumped in too, with Canada’s central bank performing the exact same action to bring their rates to a 14-year high, and this provides more evidence for what the US is going to do in a couple of weeks.
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.
