The sharp rise in key interest rates in the USA has sent stock market prices plummeting. The German stock index (Dax) opened on Thursday in the red, as did the stock exchanges in Paris and London. The Nikkei in Japan also closed 0.58 percent down.
On the Frankfurt Stock Exchange, the Dax opened 1.84 percent down at 12,528.37 points. In Paris, prices fell by 1.70 percent at the start of trading and by 0.92 percent in London. Investors had expected the US Federal Reserve to raise interest rates sharply, but were surprised by the prospects for the coming years: the Fed sees the key interest rate at over 4.5 percent in the coming year, and the experts do not expect a reduction before 2024.
In Japan, the central bank announced on Thursday that it would continue to pursue an expansive monetary policy. As a result, the dollar against the yen briefly rose to a 24-year high. However, prices on the Tokyo stock exchange fell – experts also attribute this to the expectation of a weaker economy worldwide: Export companies feared a slowdown in the economy due to interest rate increases, explained the analysts at Daiwa Securities, for example.
Prices also fell in the US, with the dollar hitting a 20-year high. Higher interest rates make investments in dollars and government securities more attractive – in companies, on the other hand, less attractive. In the fight against high inflation, the US Federal Reserve again raised the key interest rate sharply by 0.75 points to between 3.0 and 3.25 percent. Fed Chair Jerome Powell acknowledged that the stance of high interest rates is bringing with it a period of slowing growth and rising unemployment.
But he named curbing price increases as the most important goal: “We have to overcome inflation. I wish there was a painless way to do this. But there isn’t.” Powell stressed that based on historical experience, premature easing of monetary policy is not advisable. The Fed will therefore continue on its current course against inflation “until the job is done”.
The Fed has significantly lowered its growth forecast for the current year. She only expects minimal economic growth in the USA of 0.2 percent. In June, she had still expected an increase of 1.7 percent. Fed experts now expect economic growth of 1.2 percent for 2023.
It is already the fifth increase in the key interest rate this year and the third increase of 0.75 percentage points in a row. The Fed last resorted to such drastic measures in the 1970s and 1980s. At that time, the result was also a deep recession. US inflation rose to 9.1 percent in June, the highest in over 40 years. In July it fell slightly to 8.5 percent and in August to 8.3 percent year-on-year. According to the Fed, however, this is still far too high.
In Great Britain, too, the central bank is relying on a further increase in the key interest rate in the fight against inflation. Observers expect it to raise the rate by 0.5 points to 2.24 percent on Thursday.
Entrepreneurs and citizens must have submitted their property tax returns in six weeks. Several large associations and the German Tax Union are demanding that Finance Minister Lindner extend the deadline beyond October 31. Otherwise there is even a threat of a “collapse of the tax offices.
Although the third relief package has not yet been paid out, economists and associations are already calling for the fourth all-round blow. Above all, they lack assistance for working people with low incomes and for pensioners. These measures could come.
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