Last minute rescue. Until recently, US President Joe Biden’s Democrats had fought bitterly with the Republicans to find a compromise. Now it’s done: The US Senate has passed President Joe Biden-backed legislation that removes the $31.4 trillion debt ceiling, averting a historic, first-time default. Without the move, the US government would have run out of money in a matter of days. The final vote in Congress ends a long political nail-biter, which had caused great concern about an economic crisis in the USA and beyond. We provide some ideas for resource investors with vision.
Central banks in a dilemma – high interest rates, inflation remains
Now we have another exciting central bank week behind us. To be honest, it wasn’t as exciting as many thought. At least there was a small surprise, because the American FED is putting its rate hike program into pause mode. Ten increases in a row and now an interest rate pause with a remaining corridor of 5.00 to 5.25 percent. Had the sharply correcting Nasdaq already anticipated this result? No, the markets follow their own logic, which is: stagflation everywhere should lead to a natural containment of inflation. Further interest rate hikes are therefore currently obsolete. Nevertheless, the so-called Fed dots have not corrected any more, so the market is still expecting smaller increases in 2023 to around 5.6%, according to the middle projection. So Fed members remain hawkish, although quite a few economists had thought it possible that interest rates would not be raised again this year, or even lowered at all. Consequently, the interest rate projections for 2024 and 2025 were raised further.
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