Global markets falter as Fed’s inflation battle fuels rate hikes from global central banks – Fortune | Jewelry Dukan

US futures moved slightly higher on Thursday as central banks in Europe and Asia tightened monetary policy after another big Federal Reserve rate hike this week, in what becomes a global effort to cool spiraling inflation.

Dow Jones Industrial futures were up 0.2% and S&P 500 futures were up 0.1%.

Wall Street’s benchmark S&P 500 index fell 1.7% to a two-month low after the Fed hiked interest rates by 0.75 percentage point to a 14-year high on Wednesday. The Fed said it expects that rate to be a full percentage point higher by the end of the year than it was three months ago.

“The Fed still managed to outperform the markets,” Fidelity International’s Anna Stupnytska said in a report. “Economic strength and a hot labor market point to a limited trade-off between growth and inflation — at least for now.”

London and Frankfurt fell after the Swiss central bank also hiked its key interest rate by the largest margin ever – 0.75 percentage point – and said it could not rule out further hikes “to ensure price stability”. The Bank of England raised interest rates by half a point, as did the Philippine central bank. Norway also raised its key interest rate.

Sweden surprised almost all economists this week with a one-point increase.

The Fed and central banks in Europe and Asia are raising interest rates to slow economic growth and cool inflation, which is at multi-year highs.

Traders fear they could derail global economic growth. Fed officials recognize the possibility that such aggressive rate hikes could trigger a recession but say inflation needs to be brought under control. They point to a relatively strong US labor market as evidence that the economy can tolerate higher borrowing costs.

“The Fed’s new economic forecasts show that it will tolerate a recession in order to bring down inflation,” EY Parthenon’s Gregory Daco said in a report.

In Asia, the Shanghai Composite Index fell 0.3% to 3,108.90 and the Nikkei 225 in Tokyo slipped 0.6% to 27,153.83. Hong Kong’s Hang Seng fell 1.7% to 18,134.63.

South Korea’s Kospi was down 0.6% to 2,332.31 and India’s Sensex opened 0.2% to 59,304.34.

New Zealand, Bangkok and Jakarta rose while Singapore fell.

The yield on the 2-year government bond, or the difference between the market price and the payout if held to maturity, rose to 4.09% on Wednesday from 3.97% late Tuesday. It was trading at its highest level since 2007.

The 10-year Treasury yield, which drives mortgage rates, crept back to 3.55% from 3.56%.

Fed Chair Jerome Powell stressed his determination to raise rates high enough to push inflation back towards the central bank’s 2% target. Powell said the Fed was just beginning to get to that level with this latest hike.

The US Federal Reserve raised interest rates, which affect many consumer and business loans, to a range of 3% to 3.25%. This is the fifth rate hike this year and from zero at the start of the year.

The Fed released a forecast known as the “dot plot” showing that it expects its policy rate to end the year at 4.4%, a full point higher than forecast in June.

Consumer prices in the US increased by 8.3% in August. That was down from the 9.1% peak in July, but core inflation, which excludes volatile food and energy prices to give a clearer picture of the trend, rose to 0.6% mom, versus the rise of 0.3% in July.

The world economy was also shaken by the Russian invasion of Ukraine, which drove up prices for oil, wheat and other commodities.

In energy markets, U.S. crude, the benchmark in electronic trading on the New York Stock Exchange, gained 89 cents to $83.83 a barrel. The contract fell $1 on Wednesday to $82.94. Brent crude, the price basis for international oil trading, rose 86 cents to $90.69 a barrel in London. It lost 79 cents in the previous session to $89.83.

The dollar fell to 141.42 yen from 143.46 yen on Wednesday.

The yen fell to a 24-year low against the dollar after the Bank of Japan left interest rates unchanged, then rose after the bank intervened in the foreign exchange market.

The euro fell from 99.09 cents to 98.63 cents.

The major Wall Street indices are poised for their fifth weekly loss in six weeks.

On Wednesday, the Dow fell 1.7% and the Nasdaq Composite lost 1.8%.


McDonald reported from Beijing; Ott reported from Washington.

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