After the interest rate meetings of the American Federal Reserve on Wednesday and the European Central Bank (ECB), the Bank of England and the Swiss National Bank on Thursday, sadness prevailed on the capital markets.

In particular, the fall in the November inflation rate in America to 7.1 percent (after 9.1 percent in June) had raised expectations that the central banks could give a signal when their interest rate hikes could come to an end given the recent significant drop in commodity prices.

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However, there were no such signals and the Dax slipped 3 percent in the afternoon and struggled with the 14,000 point mark.

Interest-sensitive stocks like Zalando fell by 7 percent.

The Euro Stoxx 50 lost even more, and the Dow Jones fell about 2 percent on Wall Street in early trading.

The ECB's announcement that it would reduce its bond holdings from March caused price losses on the bond market.

As a result, the yield on the ten-year Bund rose by 0.15 percentage points to 2.09 percent and that of the two-year bond by 0.26 percentage points to 2.37 percent.

Since maturing bonds will no longer be replaced, the ECB will withdraw liquidity from the market.

In doing so, it is strengthening its already tighter monetary policy.

“At least two more rate hikes”

As expected, the ECB increased its key interest rate by 50 basis points to 2.5 percent.

However, the accompanying statement by ECB President Christine Lagarde worried many stockbrokers.

Accordingly, interest rates would have to continue to rise “significantly” in order to bring inflation rates back close to the targeted 2 percent.

"This should mean at least two further interest rate hikes of 50 basis points each, possibly more," analyzed the Landesbank Baden-Württemberg (LBBW).

"The interest rate outlook in particular should make some market participants uncomfortable."

Ulrich Kater, chief economist at Deka, dampens expectations that attitudes could change soon: “The rate hikes still have to go a long way.

It is true that the inflation rate is on the decline in the coming months.

But speculation about easing is premature.

Only when inflation moves back to 2 percent in all sub-areas can interest rate cuts be considered.”

The US Federal Reserve also raised interest rates by 0.5 percentage points on Wednesday evening, as expected.

Here, the projections of the currency watchdogs worried the markets, as they point to further interest rate hikes and no interest rate cuts in 2023. This had already dampened the mood on the stock exchanges on Thursday morning before the ECB meeting, which always hopes for low interest rates to stimulate growth.

"A normalization of monetary policy is only becoming apparent for 2024 and beyond," said Christian Scherrmann, US economist at the fund company DWS.

"However, this is happening very gradually, with FOMC members planning to cut interest rates to 4.1 percent in 2024 and 3.1 percent in 2025."

Fed President Jerome Powell's comments suggest that central bankers are not yet convinced that inflation is already on a sustained downward path.

Elliot Hentov of State Street Global Advisors said: "Inflation numbers may be falling, but markets are making life difficult for the Fed by loosening financial conditions too much and too quickly."

The broad American stock index S&P 500 has risen by almost 10 percent since the last Fed meeting.

"This is forcing the Fed to do a balancing act between acknowledging declining inflation trends and signaling that monetary policy needs to remain tight for longer," Hentov said.

For investors, this means that volatile times are still ahead in the financial markets, said Michael Heise, chief economist at HD Trust.

“The Fed will probably only announce an end to interest rate hikes if further months of declining inflation are observed and wage increases lose momentum.”