Comment: Inflation and debt will keep capital market interest rates high

Inflation rates above four percent in the euro zone: This last happened in September 2023. Inflation is now twice as high as the European Central Bank's (ECB) inflation target actually envisages. And because of the tricky situation on the oil and gas markets, relief is not expected until at least spring.

Inflation has not risen nearly as steeply as in the high inflation phase of 2022, when it peaked at 10.6 percent. On the other hand, the current second wave of inflation will last much longer. Fortunately, there is consensus in the ECB Tower that there is a need for further action for the European Central Bank in view of these gloomy prospects.

It has long been clear that, in addition to energy prices, the expansion of computing capacity for artificial intelligence (AI) and the insatiable demand for semiconductors are also driving up consumer prices. In addition, fiscal policy has an expansionary and, in some cases, price-increasing effect, as shown by record orders for the defense industry.

The AI ​​boom is clearly having an inflationary effect in the current investment phase, much more so in the USA than in the Eurozone. The influential economist Torsten Slok has put forward the macroeconomically supported thesis: The US Federal Reserve (Fed) would actually have to raise the key interest rate from the current level of just under four to almost seven percent in order to reduce inflation to two percent after more than five years above the target.