Europe’s inflation is controlled by the European Central Bank. While, in general, interest rates are lower and Europe seems to be winning the battle against inflation, like Germany and France, some countries are still experiencing high inflation while others are successfully managing to keep it under control. This cautious approach is thought to only lead to interest rate cuts later in the year. Consumers will have to deal with higher prices a bit longer.
Following in the footsteps of the FED and the UK, Australia has announced no rate cuts yet.
Are central banks being overly cautious out of fear of a recession, and how long must consumers struggle? Will a much-needed rate cut push inflation back into the danger zone?
Some even predict that prolonged interest rate freezes could weaken the economy. Central banks are keeping interest rates at a 19-year high, and consumers are suffering, comments Nigel Green, CEO of international deVere financial advisory. He goes on to say that the central banks’ indecision is unwarranted and that interest rates need to be cut now to ease the burden of consumers riddled with mortgages and other debt like credit cards.
There seems to be an expectation that inflation will drop to what it was five years ago, but realistically, that might not be possible due to deglobalisation. Historically, deglobalisation has caused high inflation as countries have decreased international trade.
Higher inflation seems to be the norm for now, and consumers must tighten their belts a little longer.
This still offers investors opportunities to take advantage of lower stock prices and ensure portfolio diversification.