According to the data of the German Federal Statistical Office, the German economy grew by 0% in the second quarter of 2023. On an annual basis, the GDP was recorded as -0.2%. This shows the negative impact of high interest rates on demand.
High interest rates in Europe cause economic growth to be slow. With the increase in interest rates recently, consumer expenditures and investments decreased, while the growth rate of the economy slowed down. This complicates the economic recovery after the pandemic. The falling demand in other countries is putting extra pressure on Germany from the big industrial producers.
The reason for the high interest rates is based on the pandemic period. Governments scattering money during the COVID-19 pandemic have fueled demand, making inflation a major problem. The European Central Bank and the FED have been raising interest rates for a long time to fight inflation.
Markets are waiting for Fed Chairman Powell’s speech at the Jackson Hole meeting that will take place in the USA today. ECB President Lagarde will be in front of the cameras at around 14.00.
