Frankfurt Even the war in Ukraine will probably not avert the forthcoming turnaround in interest rates: For the first time in decades, the major central banks are planning an abrupt change in monetary policy. The British central bank has recently raised interest rates twice in a row, and the US Federal Reserve will follow suit this month.
The triggers are the inflation rates, which have been rising sharply for several months. In the USA, inflation was over seven percent in January, and the data for February should be even higher on Thursday. In the euro zone, the inflation rate is currently almost six percent – the target of the European Central Bank ECB is two percent.
If interest rates do rise, higher market yields would mean big losses for bondholders. The turmoil of recent months gave a foretaste of this, as market yields rose in anticipation of the turnaround in interest rates before falling again as a result of the Ukraine war.
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