Stock markets fell on Thursday as the US Federal Reserve and European central banks triggered larger interest rate hikes that aim to stifle inflation but raise fears of a recession.
On Wall Street, the Dow Jones Industrial Average opened higher but then trailed the tech-heavy Nasdaq and the broader S&P 500 into negative territory.
European markets were down in afternoon trading, with London’s FTSE 100 losing 0.5% after the Bank of England raised its rate again to fight inflation and signaled that the Kingdom UK entered a recession in the current quarter.
The BoE’s 0.5 percentage point hike was lower than the US Federal Reserve’s third consecutive 0.75 point hike.
The world’s major central banks are rushing to hike rates to dampen fiery global consumer prices, but traders fear rising borrowing costs could herald a recession.
While the Fed’s 0.75 percentage point hike was widely expected, the central bank’s forecast that borrowing costs would likely be held above 4% through next year sparked some surprise.
Powell reiterated his determination to focus on reducing inflation – which is at its highest level in four decades – and agreed that the campaign will hit Americans hard.
“What struck market participants yesterday was that the Fed, led by Fed Chairman (Jerome) Powell, really wants to do business now by restoring price stability, and if that means a hard landing for the economy, so be it,” Briefing said. communications analyst Patrick O’Hare.
Switzerland and Norway also made big interest rate hikes on Thursday, two days after a massive hike in Sweden.
In Asia, Indonesia and the Philippines also tightened monetary policy, but the Bank of Japan bucked the global trend by leaving its status quo in place.
The dollar pared its gains after appreciating against other major currencies following the Fed’s rate decision.
The pound briefly dipped to a new 37-year low at $1.1212 but rallied after the BoE announcement.
The yen, which fell due to the policy gap between the US and Japanese central banks, also recovered against the dollar after Japan’s finance ministry said it intervened in the currency market.
Oil prices extended recent gains after Russian President Vladimir Putin announced a partial mobilization of the Russian military and issued a veiled threat to use nuclear weapons against the West.