Interest rates continue to fall: Fed announces exciting developments!

Interest rates continue to fall: Fed announces exciting developments!

What's happening on the money market? There is currently news from the USA and Europe that is not only making financial experts sit up and take notice. The Federal Reserve (Fed) recently signaled that borrowing costs are expected to fall further this year. This decision could have a positive effect for many, as interest rate cuts of half a percentage point are still expected this year. Although the Fed has revised down the pace of future interest rate cuts, it plans to cut by a quarter of a percentage point in each of 2026 and 2027, Vietnam.vn reported.

It didn't take long for the markets to react: on June 19, the Dow Jones rose by 124.01 points or 0.29 percent to 42,339.81 points. The S&P 500 and the Nasdaq Composite also rose slightly, while gold prices rose slightly following the Fed's announcement. Spot gold prices rose 0.1 percent to $3,392.08 an ounce. A sign that investors are looking for security and demand for precious metals could be increasing.

Global economy in view

But what is the economic situation in Europe? According to the Bundesbank, there is also a decline in inflation in this country after it was at its highest in recent years. In early 2021, energy and food prices jumped, causing the consumer price index to climb to 8.6 percent by October 2022, compared to just 0.7 percent a year ago. In the euro area, inflation rates were now even in the double-digit range, which led to a clear need for action by the central banks. The European Central Bank (ECB) responded to this with several interest rate increases, among which the main refinancing rate received worldwide attention because it had remained at zero percent for a long time, as bundesbank.de describes in detail.

However, the global environment is showing signs of stabilization. Global industrial production and trade have recovered strongly, although business adjustments remain challenging due to ever-increasing production costs and supply chain issues. In addition, geopolitical conflicts, such as the Russian war of aggression against Ukraine, were the focus as they caused further increases in raw material prices. Many companies have had difficulty adapting to the sudden changes in markets, as evidenced by increased production costs.

A look into the future

In the Eurozone, the inflation rate in 2023 is currently 5.4 percent, a significant decline compared to 8.4 percent in the same period last year. The aim here continues to be an inflation target of 2 percent, which pushes the ECB to carefully weigh interest rate policy in order to both stabilize the currency and not endanger economic growth - a challenge that not only applies in the euro area, but is also taken into account by other central banks worldwide, as statista.com analyzes.

In summary, it shows that the money market is influenced by a variety of factors and that monetary policy decisions in the USA and Europe have far-reaching consequences. The coming months could be decisive in determining whether the global economy stabilizes or whether we face new challenges.