The US Federal Reserve (Fed) has already initiated the turnaround in interest rates, and the European Central Bank (ECB) is following suit. What exactly is happening with this turnaround in interest rates and what are the consequences?
This is what happens with the interest rate policy of the ECB and FED:
Central banks directly influence short-term interest rates by raising rates. They influence long-term rates indirectly by buying fewer interest-bearing securities than before: This means that prices fall with demand and, in return, yields automatically rise because the interest coupons do not change, but are purchased at a low price. Higher interest rates are intended to curb inflation, but they can also lead to an economic slump or even a recession.
How does this affect the bonds?
Read on now
Get access to this and every other article in the
Web and in our app free of charge for 4 weeks.
Continue
Read on now
Get access to this and every other article in the
Web and in our app free of charge for 4 weeks.
Continue