GRIMALDI & PARTNERS: Rising interest rates and fears of recession are unsettling investors

By Silvano Grimaldi, CEO Grimaldi & Partners

Zurich – Will interest rate hikes lead to a deep recession? Is a mild downturn in the economy (soft landing) realistic? How should investors position themselves? Silvano Grimaldi, CEO of the independent asset management company Grimaldi & Partners AG, gives you the answers to these questions.

Reactions of the central banks to the high inflation rates

For a long time, practically all central banks and most economists underestimated the extent of the inflation increases, which are usually measured by consumer price indices. In order to prevent further rises in these inflation rates, the central banks are raising interest rates and shrinking their balance sheets. The Fed will have to continue the rate hike cycle for some time in the coming year, since experience has shown that interest rate increases only have a noticeable effect on price developments after a considerable delay – ie only after 12 to 18 months. If the ECB completes the rate hike cycle in spring 2023, the main refinancing rate could already have peaked at 3.0 percent. In Switzerland increases in prices caused by the price development of imported goods and services are significantly weakened by the appreciation of the CHF against the US dollar and the euro.

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